Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So, should one consider investing in PulteGroup, Inc. (NYSE:PHM)? The smart money sentiment can provide an answer to this question.
Smart money investors are turning bullish towards PulteGroup, Inc. (NYSE:PHM). However, in order to get a better sense of the stock’s popularity, we will also compare PHM to other stocks, including Mednax Inc. (NYSE:MD), Bed Bath & Beyond Inc. (NASDAQ:BBBY), and Avery Dennison Corp (NYSE:AVY) at the end of this article.
At the moment there are a multitude of formulas stock market investors use to value stocks. Some of the most innovative formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the best money managers can outclass their index-focused peers by a significant margin (see the details here).
Keeping this in mind, let’s check out the recent action encompassing PulteGroup, Inc. (NYSE:PHM).
How are hedge funds trading PulteGroup, Inc. (NYSE:PHM)?
At the end of September, 32 funds tracked by Insider Monkey were bullish on PulteGroup, up by 33% over the quarter. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Greenhaven Associates, managed by Edgar Wachenheim, holds the largest position in PulteGroup, Inc. (NYSE:PHM), worth $111.3 million, comprising 2.1% of its 13F portfolio. The second most bullish fund manager is Elliott Management, led by Paul Singer, which holds a $100.2 million position; 0.8% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions comprise David L Briggs’s Dulcet Capital and Charles Clough’s Clough Capital Partners.
Consequently, some big names have been driving this bullishness. Land & Buildings Investment Management created the largest position in PulteGroup, Inc. (NYSE:PHM). Land & Buildings Investment Management had $17.4 million invested in the company at the end of the third quarter. Emanuel J. Friedman’s EJF Capital also made a $10 million investment in the stock during the quarter. The other funds with brand new PHM positions are David M. Markowitz’s Oskie Capital Management, Matthew Tewksbury’s Stevens Capital Management, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s check out hedge fund activity in other stocks similar to PulteGroup, Inc. (NYSE:PHM). We will take a look at Mednax Inc. (NYSE:MD), Bed Bath & Beyond Inc. (NASDAQ:BBBY), Avery Dennison Corp (NYSE:AVY), and Shire PLC (ADR) (NASDAQ:SHPG). This group of stocks’ market caps match PHM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $1.08 billion. That figure was $365 million in PHM’s case. Shire PLC (ADR) (NASDAQ:SHPG) is the most popular stock in this table and Mednax Inc. (NYSE:MD) is the least popular one with only 12 bullish hedge fund positions. PulteGroup, Inc. (NYSE:PHM) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Shire PLC (ADR) (NASDAQ:SHPG) might be a better candidate to consider a long position.