Hedge Funds Are Piling Into Beazer Homes USA, Inc. (BZH)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Beazer Homes USA, Inc. (NYSE:BZH) based on that data and determine whether they were really smart about the stock.

Beazer Homes USA, Inc. (NYSE:BZH) has experienced an increase in support from the world’s most elite money managers in recent months. Beazer Homes USA, Inc. (NYSE:BZH) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistics is 20. There were 12 hedge funds in our database with BZH positions at the end of the first quarter. Our calculations also showed that BZH isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Andy Redleaf Andrew Redleaf Whitebox Advisors

Andy Redleaf of Whitebox Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to take a look at the new hedge fund action encompassing Beazer Homes USA, Inc. (NYSE:BZH).

What have hedge funds been doing with Beazer Homes USA, Inc. (NYSE:BZH)?

At Q2’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 58% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in BZH a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Beazer Homes USA, Inc. (NYSE:BZH) was held by Angelo Gordon & Co, which reported holding $11.7 million worth of stock at the end of September. It was followed by Royce & Associates with a $11.2 million position. Other investors bullish on the company included Whitebox Advisors, AQR Capital Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Angelo Gordon & Co allocated the biggest weight to Beazer Homes USA, Inc. (NYSE:BZH), around 1.6% of its 13F portfolio. Whitebox Advisors is also relatively very bullish on the stock, setting aside 0.17 percent of its 13F equity portfolio to BZH.

With a general bullishness amongst the heavyweights, key money managers have jumped into Beazer Homes USA, Inc. (NYSE:BZH) headfirst. Angelo Gordon & Co, managed by John M. Angelo and Michael L. Gordon, established the largest position in Beazer Homes USA, Inc. (NYSE:BZH). Angelo Gordon & Co had $11.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $2.7 million position during the quarter. The other funds with brand new BZH positions are D. E. Shaw’s D E Shaw, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Michael Gelband’s ExodusPoint Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Beazer Homes USA, Inc. (NYSE:BZH). We will take a look at QEP Resources Inc (NYSE:QEP), Orchid Island Capital, Inc. (NYSE:ORC), Seneca Foods Corp (NASDAQ:SENEA), Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL), Tellurian Inc. (NASDAQ:TELL), Bonanza Creek Energy Inc (NYSE:BCEI), and CRA International, Inc. (NASDAQ:CRAI). All of these stocks’ market caps are similar to BZH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QEP 19 33027 4
ORC 4 12806 -4
SENEA 9 23833 2
RIGL 18 69169 4
TELL 4 2971 -2
BCEI 15 47984 2
CRAI 12 37203 1
Average 11.6 32428 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.6 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $41 million in BZH’s case. QEP Resources Inc (NYSE:QEP) is the most popular stock in this table. On the other hand Orchid Island Capital, Inc. (NYSE:ORC) is the least popular one with only 4 bullish hedge fund positions. Beazer Homes USA, Inc. (NYSE:BZH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BZH is 88.5. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on BZH as the stock returned 31.1% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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