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Did Hedge Funds Drop The Ball On Tri Pointe Group Inc (TPH) ?

Is Tri Pointe Group Inc (NYSE:TPH) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.

Is Tri Pointe Group Inc (NYSE:TPH) a bargain? Hedge funds are turning less bullish. The number of long hedge fund positions went down by 2 in recent months. Our calculations also showed that TPH isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Clint Carlson, Carlson Capital

We’re going to take a look at the key hedge fund action encompassing Tri Pointe Group Inc (NYSE:TPH).

What does the smart money think about Tri Pointe Group Inc (NYSE:TPH)?

At Q4’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the second quarter of 2018. By comparison, 26 hedge funds held shares or bullish call options in TPH a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

TPH_apr2019

Among these funds, Greenhaven Associates held the most valuable stake in Tri Pointe Group Inc (NYSE:TPH), which was worth $53.8 million at the end of the fourth quarter. On the second spot was Carlson Capital which amassed $18.7 million worth of shares. Moreover, Fisher Asset Management, Renaissance Technologies, and Citadel Investment Group were also bullish on Tri Pointe Group Inc (NYSE:TPH), allocating a large percentage of their portfolios to this stock.

Because Tri Pointe Group Inc (NYSE:TPH) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedgies who sold off their positions entirely last quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest position of all the hedgies followed by Insider Monkey, worth about $1.6 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dumped about $0.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Tri Pointe Group Inc (NYSE:TPH). We will take a look at HNI Corp (NYSE:HNI), Cision Ltd. (NYSE:CISN), Pretium Resources Inc (NYSE:PVG), and CareTrust REIT, Inc. (NASDAQ:CTRE). This group of stocks’ market valuations are closest to TPH’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HNI 18 29238 8
CISN 17 52538 0
PVG 22 124075 5
CTRE 16 125667 5
Average 18.25 82880 4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $128 million in TPH’s case. Pretium Resources Inc (NYSE:PVG) is the most popular stock in this table. On the other hand CareTrust REIT, Inc. (NASDAQ:CTRE) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Tri Pointe Group Inc (NYSE:TPH) is even less popular than CTRE. Hedge funds clearly dropped the ball on TPH as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 TPH as the stock returned 27.5% and outperformed the market by an even larger margin.

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

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