Hedge Funds Are Crazy About LGI Homes Inc (LGIH)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2019. What do these smart investors think about LGI Homes Inc (NASDAQ:LGIH)?

Is LGI Homes Inc (NASDAQ:LGIH) a bargain? Hedge funds are becoming hopeful. The number of bullish hedge fund bets rose by 2 lately. Our calculations also showed that LGIH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most investors, hedge funds are perceived as slow, old financial tools of the past. While there are over 8000 funds in operation at the moment, We look at the leaders of this group, approximately 750 funds. These hedge fund managers shepherd the lion’s share of the smart money’s total asset base, and by monitoring their inimitable investments, Insider Monkey has unsheathed various investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Richard Driehaus of Driehaus Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the new hedge fund action encompassing LGI Homes Inc (NASDAQ:LGIH).

How are hedge funds trading LGI Homes Inc (NASDAQ:LGIH)?

At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in LGIH 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.

The largest stake in LGI Homes Inc (NASDAQ:LGIH) was held by Millennium Management, which reported holding $38 million worth of stock at the end of September. It was followed by Driehaus Capital with a $25.3 million position. Other investors bullish on the company included Royce & Associates, DC Capital Partners, and ACK Asset Management. In terms of the portfolio weights assigned to each position DC Capital Partners allocated the biggest weight to LGI Homes Inc (NASDAQ:LGIH), around 14.62% of its 13F portfolio. ACK Asset Management is also relatively very bullish on the stock, setting aside 3.32 percent of its 13F equity portfolio to LGIH.

Now, specific money managers were breaking ground themselves. Centiva Capital, managed by Karim Abbadi and Edward McBride, initiated the largest call position in LGI Homes Inc (NASDAQ:LGIH). Centiva Capital had $1.7 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates also initiated a $0.8 million position during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Steve Cohen’s Point72 Asset Management.

Let’s check out hedge fund activity in other stocks similar to LGI Homes Inc (NASDAQ:LGIH). These stocks are The RealReal, Inc. (NASDAQ:REAL), Agios Pharmaceuticals Inc (NASDAQ:AGIO), Mednax Inc. (NYSE:MD), and BGC Partners, Inc. (NASDAQ:BGCP). This group of stocks’ market caps are similar to LGIH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
REAL 20 83144 -13
AGIO 17 103178 -1
MD 19 265778 1
BGCP 21 270227 -4
Average 19.25 180582 -4.25

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 $181 million. That figure was $130 million in LGIH’s case. BGC Partners, Inc. (NASDAQ:BGCP) is the most popular stock in this table. On the other hand Agios Pharmaceuticals Inc (NASDAQ:AGIO) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks LGI Homes Inc (NASDAQ:LGIH) is even less popular than AGIO. Hedge funds dodged a bullet by taking a bearish stance towards LGIH. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately LGIH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); LGIH investors were disappointed as the stock returned -13.3% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

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