Did Hedge Funds Make The Right Call On Century Communities, Inc (CCS) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Century Communities, Inc (NYSE:CCS) based on that data and determine whether they were really smart about the stock.

Century Communities, Inc (NYSE:CCS) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. CCS was in 17 hedge funds’ portfolios at the end of March. There were 23 hedge funds in our database with CCS holdings at the end of the previous quarter. Our calculations also showed that CCS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most stock holders, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are more than 8000 funds in operation today, Our researchers look at the top tier of this group, around 850 funds. These investment experts command the lion’s share of all hedge funds’ total capital, and by watching their top equity investments, Insider Monkey has revealed numerous investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Brad Farber Atika Capital

Brad Farber of Atika Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to take a glance at the recent hedge fund action regarding Century Communities, Inc (NYSE:CCS).

Hedge fund activity in Century Communities, Inc (NYSE:CCS)

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in CCS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Howard Marks’s Oaktree Capital Management has the largest position in Century Communities, Inc (NYSE:CCS), worth close to $26.4 million, comprising 0.7% of its total 13F portfolio. Coming in second is Matthew Lindenbaum of Basswood Capital, with a $11.6 million position; 1.4% of its 13F portfolio is allocated to the stock. Other peers that are bullish consist of Dmitry Balyasny’s Balyasny Asset Management, Brad Farber’s Atika Capital and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Lyon Street Capital allocated the biggest weight to Century Communities, Inc (NYSE:CCS), around 2.28% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, earmarking 1.36 percent of its 13F equity portfolio to CCS.

Since Century Communities, Inc (NYSE:CCS) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds that decided to sell off their positions entirely by the end of the first quarter. At the top of the heap, Israel Englander’s Millennium Management said goodbye to the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $5.1 million in stock. Ric Dillon’s fund, Diamond Hill Capital, also cut its stock, about $4.6 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 6 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks similar to Century Communities, Inc (NYSE:CCS). These stocks are Innate Pharma S.A. (NASDAQ:IPHA), Canaan Inc. (NASDAQ:CAN), Genesis Energy, L.P. (NYSE:GEL), and B. Riley Financial, Inc. (NASDAQ:RILY). All of these stocks’ market caps match CCS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IPHA 4 39880 0
CAN 3 740 1
GEL 4 7087 3
RILY 14 71858 -2
Average 6.25 29891 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $56 million in CCS’s case. B. Riley Financial, Inc. (NASDAQ:RILY) is the most popular stock in this table. On the other hand Canaan Inc. (NASDAQ:CAN) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Century Communities, Inc (NYSE:CCS) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on CCS as the stock returned 155.8% since Q1 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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