Is American Homes 4 Rent (NYSE:AMH) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2-and-20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
American Homes 4 Rent (NYSE:AMH) was in 16 hedge funds’ portfolios at the end of September. American Homes 4 Rent (NYSE:AMH) has experienced a leveling off of hedge fund interest of late. There were 16 hedge funds in our database with American Homes 4 Rent (NYSE:AMH) holdings at the end of the previous quarter. At the end of this article, we will also compare American Homes 4 Rent (NYSE:AMH) to other stocks including Dillard’s, Inc. (NYSE:DDS), Kirby Corporation (NYSE:KEX), and Atmel Corporation (NASDAQ:ATML) to get a better sense of its popularity.
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At the moment there are a large number of metrics stock market investors can use to appraise stocks. Two of the most useful metrics are hedge fund and insider trading sentiment. we have shown that, historically, those who follow the top picks of the top investment managers can beat the S&P 500 by a very impressive amount (see the details here).
Now, we’re going to take a peek at the fresh action surrounding American Homes 4 Rent (NYSE:AMH).
What does the smart money think about American Homes 4 Rent (NYSE:AMH)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, flat over the last quarter. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to publicly available holdings data compiled by Insider Monkey, Legg Mason Capital Management, now a part of ClearBridge, has the number one position in American Homes 4 Rent (NYSE:AMH), worth close to $105.9 million, accounting for 2.2% of its total 13F portfolio. Sitting in the number two spot is Tourbillon Capital Partners, led by Jason Karp, holding a $105.3 million position; the fund has 2.8% of its 13F portfolio invested in the stock. Remaining hedgies that are bullish contain Michael Platt and William Reeves’ BlueCrest Capital Mgmt., and Ken Griffin’s Citadel Investment Group.
Seeing as American Homes 4 Rent (NYSE:AMH) has witnessed level sentiment from the entirety of the hedge funds we track, we can see that there exists a select few funds that slashed their full holdings heading into Q4. Interestingly, Emanuel J. Friedman’s EJF Capital dumped the largest stake of all the hedgies monitored by Insider Monkey, worth close to $116.1 million in stock. Matt Sirovich and Jeremy Mindich’s fund, Scopia Capital, also dumped its stock, about $54.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as American Homes 4 Rent (NYSE:AMH) but similarly valued. We will take a look at Dillard’s, Inc. (NYSE:DDS), Kirby Corporation (NYSE:KEX), Atmel Corporation (NASDAQ:ATML), and Sovran Self Storage Inc (NYSE:SSS). This group of stocks’ market valuations resemble American Homes 4 Rent (NYSE:AMH)’s market valuation.
|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 27 hedge funds with bullish positions and the average amount invested in these stocks was $385 million. That figure was $373 million in American Homes 4 Rent (NYSE:AMH)’s case. Atmel Corporation (NASDAQ:ATML) is the most popular stock in this table. On the other hand, Sovran Self Storage Inc (NYSE:SSS) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks American Homes 4 Rent (NYSE:AMH) is even less popular than Sovran Self Storage Inc (NYSE:SSS). Considering that hedge funds aren’t fond of this stock in relation to similar-sized companies, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.