Did Hedge Funds Drop The Ball On Meritage Homes Corp (MTH) ?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Meritage Homes Corp (NYSE:MTH).

Meritage Homes Corp (NYSE:MTH) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of December. At the end of this article we will also compare MTH to other stocks including JELD-WEN Holding, Inc. (NYSE:JELD), MicroStrategy Incorporated (NASDAQ:MSTR), and Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) to get a better sense of its popularity.

In the 21st century investor’s toolkit there are tons of signals market participants employ to evaluate stocks. A couple of the less known signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce the broader indices by a very impressive amount (see the details here).

BlueMountain Capital Management's Returns, AUM and Holdings

We’re going to take a peek at the key hedge fund action regarding Meritage Homes Corp (NYSE:MTH).

What have hedge funds been doing with Meritage Homes Corp (NYSE:MTH)?

Heading into the first quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in MTH a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).


More specifically, Fisher Asset Management was the largest shareholder of Meritage Homes Corp (NYSE:MTH), with a stake worth $59.9 million reported as of the end of December. Trailing Fisher Asset Management was Echo Street Capital Management, which amassed a stake valued at $42.9 million. East Side Capital (RR Partners), D E Shaw, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

Since Meritage Homes Corp (NYSE:MTH) has faced falling interest from the smart money, we can see that there is a sect of fund managers who were dropping their entire stakes last quarter. At the top of the heap, John Khoury’s Long Pond Capital sold off the largest position of all the hedgies monitored by Insider Monkey, worth about $28 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $6.4 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Meritage Homes Corp (NYSE:MTH). We will take a look at JELD-WEN Holding, Inc. (NYSE:JELD), MicroStrategy Incorporated (NASDAQ:MSTR), Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), and Benefitfocus Inc (NASDAQ:BNFT). This group of stocks’ market values are similar to MTH’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JELD 16 291975 3
MSTR 23 141808 -2
KTOS 12 99253 -1
BNFT 15 68806 3
Average 16.5 150461 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $156 million in MTH’s case. MicroStrategy Incorporated (NASDAQ:MSTR) is the most popular stock in this table. On the other hand Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) is the least popular one with only 12 bullish hedge fund positions. Meritage Homes Corp (NYSE:MTH) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on MTH as the stock returned 31.8% and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.