While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding American Homes 4 Rent (NYSE:AMH).
Is American Homes 4 Rent (NYSE:AMH) a superb investment now? Money managers were in an optimistic mood. The number of long hedge fund positions increased by 2 lately. American Homes 4 Rent (NYSE:AMH) was in 33 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AMH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 31 hedge funds in our database with AMH holdings at the end of June.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a peek at the recent hedge fund action regarding American Homes 4 Rent (NYSE:AMH).
Do Hedge Funds Think AMH Is A Good Stock To Buy Now?
At Q3’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the second quarter of 2021. By comparison, 24 hedge funds held shares or bullish call options in AMH a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Long Pond Capital was the largest shareholder of American Homes 4 Rent (NYSE:AMH), with a stake worth $146.5 million reported as of the end of September. Trailing Long Pond Capital was Echo Street Capital Management, which amassed a stake valued at $143.5 million. Millennium Management, D E Shaw, and V3 Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position 59 North Capital allocated the biggest weight to American Homes 4 Rent (NYSE:AMH), around 9.79% of its 13F portfolio. V3 Capital is also relatively very bullish on the stock, earmarking 8.31 percent of its 13F equity portfolio to AMH.
Now, key hedge funds have jumped into American Homes 4 Rent (NYSE:AMH) headfirst. Tudor Investment Corp, managed by Paul Tudor Jones, initiated the largest position in American Homes 4 Rent (NYSE:AMH). Tudor Investment Corp had $5.8 million invested in the company at the end of the quarter. Joseph Samuels’s Islet Management also initiated a $3.8 million position during the quarter. The other funds with new positions in the stock are Alec Litowitz and Ross Laser’s Magnetar Capital, Nick Thakore’s Diametric Capital, and Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).
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 Hasbro, Inc. (NASDAQ:HAS), Tencent Music Entertainment Group (NYSE:TME), Mohawk Industries, Inc. (NYSE:MHK), GFL Environmental Inc. (NYSE:GFL), Equitable Holdings, Inc. (NYSE:EQH), DaVita Inc (NYSE:DVA), and Annaly Capital Management, Inc. (NYSE:NLY). This group of stocks’ market valuations resemble AMH’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $1288 million. That figure was $786 million in AMH’s case. Equitable Holdings, Inc. (NYSE:EQH) is the most popular stock in this table. On the other hand Annaly Capital Management, Inc. (NYSE:NLY) is the least popular one with only 15 bullish hedge fund positions. American Homes 4 Rent (NYSE:AMH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMH is 66. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately AMH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AMH were disappointed as the stock returned 5.2% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow American Homes 4 Rent (NYSE:AMH)
Follow American Homes 4 Rent (NYSE:AMH)
- John Rogers’ Top 10 Stock Picks
- 10 Best Silver Stocks To Buy
- Top 25 Chocolate Producing Countries In the World
Disclosure: None. This article was originally published at Insider Monkey.