Hedge Funds Done Buying KB Home (KBH)

In this article we will take a look at whether hedge funds think KB Home (NYSE:KBH) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

KB Home (NYSE:KBH) was in 25 hedge funds’ portfolios at the end of March. KBH has seen a decrease in hedge fund sentiment lately. There were 29 hedge funds in our database with KBH positions at the end of the previous quarter. Our calculations also showed that KBH isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the 21st century investor’s toolkit there are tons of indicators investors can use to value their stock investments. A pair of the most under-the-radar indicators are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can beat the market by a significant amount (see the details here).

Ken Heebner of Capital Growth Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the latest hedge fund action surrounding KB Home (NYSE:KBH).

How are hedge funds trading KB Home (NYSE:KBH)?

At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KBH over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, AQR Capital Management held the most valuable stake in KB Home (NYSE:KBH), which was worth $47.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $46.7 million worth of shares. Fisher Asset Management, Greenhaven Associates, and Capital Growth Management 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 Capital Growth Management allocated the biggest weight to KB Home (NYSE:KBH), around 2.92% of its 13F portfolio. Impala Asset Management is also relatively very bullish on the stock, dishing out 2.64 percent of its 13F equity portfolio to KBH.

Seeing as KB Home (NYSE:KBH) has faced falling interest from the smart money, it’s easy to see that there exists a select few hedge funds that slashed their positions entirely last quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the largest position of the 750 funds monitored by Insider Monkey, comprising close to $66.4 million in stock. Aaron Cowen’s fund, Suvretta Capital Management, also dumped its stock, about $17.4 million worth. These moves are important to note, as aggregate hedge fund interest fell by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as KB Home (NYSE:KBH) but similarly valued. We will take a look at Applied Industrial Technologies Inc (NYSE:AIT), National Storage Affiliates Trust (NYSE:NSA), Fitbit Inc (NYSE:FIT), and Rogers Corporation (NYSE:ROG). All of these stocks’ market caps resemble KBH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AIT 14 35993 -8
NSA 18 77143 7
FIT 26 273167 2
ROG 19 77338 -2
Average 19.25 115910 -0.25

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 $116 million. That figure was $291 million in KBH’s case. Fitbit Inc (NYSE:FIT) is the most popular stock in this table. On the other hand Applied Industrial Technologies Inc (NYSE:AIT) is the least popular one with only 14 bullish hedge fund positions. KB Home (NYSE:KBH) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on KBH as the stock returned 86% in Q2 (through June 10th) 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.