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Hedge Fund Darlings vs. D.R. Horton, Inc. (DHI) In 2019

It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like D.R. Horton, Inc. (NYSE:DHI) and compare its performance against hedge funds’ favorite stocks.

D.R. Horton, Inc. (NYSE:DHI) has experienced an increase in enthusiasm from smart money lately. Our calculations also showed that DHI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Today there are a lot of metrics market participants put to use to analyze their stock investments. A couple of the best metrics are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can outperform the S&P 500 by a healthy amount (see the details here).

John Armitage Egerton Capital

John Armitage of Egerton Capital

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a peek at the latest hedge fund action surrounding D.R. Horton, Inc. (NYSE:DHI).

How have hedgies been trading D.R. Horton, Inc. (NYSE:DHI)?

At Q3’s end, a total of 53 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DHI over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is DHI A Good Stock To Buy?

The largest stake in D.R. Horton, Inc. (NYSE:DHI) was held by Egerton Capital Limited, which reported holding $494 million worth of stock at the end of September. It was followed by Long Pond Capital with a $477.9 million position. Other investors bullish on the company included Greenhaven Associates, Lone Pine Capital, and Suvretta Capital Management. In terms of the portfolio weights assigned to each position Long Pond Capital allocated the biggest weight to D.R. Horton, Inc. (NYSE:DHI), around 12.47% of its 13F portfolio. Greenhaven Associates is also relatively very bullish on the stock, setting aside 8.9 percent of its 13F equity portfolio to DHI.

Now, key money managers were leading the bulls’ herd. Capital Growth Management, managed by Ken Heebner, established the most valuable position in D.R. Horton, Inc. (NYSE:DHI). Capital Growth Management had $77 million invested in the company at the end of the quarter. Renaissance Technologies also made a $71.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Josh Donfeld and David Rogers’s Castle Hook Partners, Principal Global Investors’s Columbus Circle Investors, and William Harnisch’s Peconic Partners.

Let’s also examine hedge fund activity in other stocks similar to D.R. Horton, Inc. (NYSE:DHI). We will take a look at ResMed Inc. (NYSE:RMD), Rockwell Automation Inc. (NYSE:ROK), ORIX Corporation (NYSE:IX), and Ameriprise Financial, Inc. (NYSE:AMP). This group of stocks’ market valuations are similar to DHI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RMD 20 135795 10
ROK 26 468953 -5
IX 4 7651 -2
AMP 27 1104619 -12
Average 19.25 429255 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $429 million. That figure was $2556 million in DHI’s case. Ameriprise Financial, Inc. (NYSE:AMP) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks D.R. Horton, Inc. (NYSE:DHI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on DHI as the stock returned 54.4% so far in 2019 (through 12/23) 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.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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