If you were to ask many traders, hedge funds are seen as delayed, old investment vehicles of a period lost to current times. Although there are over 8,000 hedge funds in operation today, Insider Monkey looks at the aristocrats of this club, about 525 funds. It is assumed that this group controls the lion’s share of the hedge fund industry’s total capital, and by tracking their highest performing picks, we’ve uncovered a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 33 percentage points in 11 months (find the details here).
Equally as necessary, optimistic insider trading sentiment is another way to look at the world of equities. Just as you’d expect, there are many motivations for a bullish insider to get rid of shares of his or her company, but just one, very clear reason why they would buy. Plenty of empirical studies have demonstrated the market-beating potential of this method if piggybackers know where to look (learn more here).
Keeping this in mind, it’s important to discuss the recent info about Hovnanian Enterprises, Inc. (NYSE:HOV).
Hedge fund activity in Hovnanian Enterprises, Inc. (NYSE:HOV)
At the end of the second quarter, a total of 17 of the hedge funds we track held long positions in this stock, a change of -15% from one quarter earlier. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings significantly.
Out of the hedge funds we follow, Randall Smith’s Alden Global Capital had the largest position in Hovnanian Enterprises, Inc. (NYSE:HOV), worth close to $26.9 million, comprising 9.1% of its total 13F portfolio. Coming in second is AQR Capital Management, managed by Cliff Asness, which held a $5.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedge funds that hold long positions include Chuck Royce’s Royce & Associates, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management.
As Hovnanian Enterprises, Inc. (NYSE:HOV) has witnessed dropping sentiment from the top-tier hedge fund industry, we can see that there were a few funds who sold off their full holdings in Q1. Intriguingly, Bruce Kovner’s Caxton Associates LP sold off the largest position of the 450+ funds we monitor, totaling close to $5.8 million in stock, and Carl Tiedemann and Michael Tiedemann of TIG Advisors was right behind this move, as the fund sold off about $0.5 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds in Q1.
How are insiders trading Hovnanian Enterprises, Inc. (NYSE:HOV)?
Legal insider trading, particularly when it’s bullish, is particularly usable when the company we’re looking at has experienced transactions within the past half-year. Over the latest six-month time frame, Hovnanian Enterprises, Inc. (NYSE:HOV) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).
We’ll also examine the relationship between both of these indicators in other stocks similar to Hovnanian Enterprises, Inc. (NYSE:HOV). These stocks are Meritage Homes Corp (NYSE:MTH), Xinyuan Real Estate Co., Ltd. (ADR) (NYSE:XIN), Beazer Homes USA, Inc. (NYSE:BZH), M/I Homes Inc (NYSE:MHO), and Gafisa SA (ADR) (NYSE:GFA). This group of stocks are the members of the residential construction industry and their market caps match HOV’s market cap.