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Did Hedge Funds Make The Right Call On Invitation Homes Inc. (INVH) ?

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 Invitation Homes Inc. (NYSE:INVH) based on that data and determine whether they were really smart about the stock.

Invitation Homes Inc. (NYSE:INVH) was in 27 hedge funds’ portfolios at the end of the first quarter of 2020. INVH has experienced a decrease in support from the world’s most elite money managers in recent months. There were 33 hedge funds in our database with INVH positions at the end of the previous quarter. Our calculations also showed that INVH 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.

Today there are dozens of indicators shareholders put to use to analyze publicly traded companies. Two of the less known indicators are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outpace the S&P 500 by a healthy amount (see the details here).

Ken Heebner of Capital Growth Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the fresh hedge fund action regarding Invitation Homes Inc. (NYSE:INVH).

Hedge fund activity in Invitation Homes Inc. (NYSE:INVH)

At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in INVH a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Stuart J. Zimmer’s Zimmer Partners has the number one position in Invitation Homes Inc. (NYSE:INVH), worth close to $169.4 million, corresponding to 3.8% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, holding a $160.2 million position; 0.2% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish include D. E. Shaw’s D E Shaw, Eduardo Abush’s Waterfront Capital Partners and James Woodson Davis’s Woodson Capital Management. In terms of the portfolio weights assigned to each position Hill Winds Capital allocated the biggest weight to Invitation Homes Inc. (NYSE:INVH), around 10.63% of its 13F portfolio. Land & Buildings Investment Management is also relatively very bullish on the stock, dishing out 5.03 percent of its 13F equity portfolio to INVH.

Because Invitation Homes Inc. (NYSE:INVH) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedgies that elected to cut their positions entirely in the first quarter. It’s worth mentioning that Josh Donfeld and David Rogers’s Castle Hook Partners dumped the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $15 million in stock, and Simon Sadler’s Segantii Capital was right behind this move, as the fund sold off about $9 million worth. These transactions are interesting, as total hedge fund interest fell by 6 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Invitation Homes Inc. (NYSE:INVH). These stocks are Ryanair Holdings plc (NASDAQ:RYAAY), Arch Capital Group Ltd. (NASDAQ:ACGL), LINE Corporation (NYSE:LN), and Credicorp Ltd. (NYSE:BAP). This group of stocks’ market values are similar to INVH’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RYAAY 22 550561 0
ACGL 33 733577 10
LN 7 59060 -6
BAP 22 193610 0
Average 21 384202 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $384 million. That figure was $563 million in INVH’s case. Arch Capital Group Ltd. (NASDAQ:ACGL) is the most popular stock in this table. On the other hand LINE Corporation (NYSE:LN) is the least popular one with only 7 bullish hedge fund positions. Invitation Homes Inc. (NYSE:INVH) is not the most popular stock in this group but hedge fund interest is still above average. 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 gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on INVH as the stock returned 29.6% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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