Here is What Hedge Funds Think About Meritage Homes Corp (MTH)

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Meritage Homes Corp (NYSE:MTH), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Meritage Homes Corp (NYSE:MTH) investors should pay attention to a decrease in hedge fund sentiment recently. Meritage Homes Corp (NYSE:MTH) was in 23 hedge funds’ portfolios at the end of March. The all time high for this statistic is 30. Our calculations also showed that MTH isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are plenty of methods investors can use to assess publicly traded companies. A couple of the less utilized methods are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top money managers can beat the S&P 500 by a healthy margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. 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 homepage. With all of this in mind let’s take a look at the latest hedge fund action regarding Meritage Homes Corp (NYSE:MTH).

Do Hedge Funds Think MTH Is A Good Stock To Buy Now?

At the end of March, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the fourth quarter of 2020. By comparison, 22 hedge funds held shares or bullish call options in MTH a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ken Fisher’s Fisher Asset Management has the most valuable position in Meritage Homes Corp (NYSE:MTH), worth close to $118.6 million, amounting to 0.1% of its total 13F portfolio. On Fisher Asset Management’s heels is Balyasny Asset Management, managed by Dmitry Balyasny, which holds a $77 million position; 0.4% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish contain Matthew Lindenbaum’s Basswood Capital, Noam Gottesman’s GLG Partners and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Verdad Advisers allocated the biggest weight to Meritage Homes Corp (NYSE:MTH), around 2.17% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, designating 1.36 percent of its 13F equity portfolio to MTH.

Judging by the fact that Meritage Homes Corp (NYSE:MTH) has witnessed declining sentiment from hedge fund managers, we can see that there exists a select few fund managers that decided to sell off their full holdings heading into Q2. Intriguingly, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth about $13 million in stock, and Andrew Sandler’s Sandler Capital Management was right behind this move, as the fund said goodbye to about $5.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 7 funds heading into Q2.

Let’s check out hedge fund activity in other stocks similar to Meritage Homes Corp (NYSE:MTH). We will take a look at iRobot Corporation (NASDAQ:IRBT), Blackbaud, Inc. (NASDAQ:BLKB), InnovAge Holding Corp. (NASDAQ:INNV), Weingarten Realty Investors (NYSE:WRI), PDC Energy Inc (NASDAQ:PDCE), ABM Industries, Inc. (NYSE:ABM), and Copa Holdings, S.A. (NYSE:CPA). This group of stocks’ market values match MTH’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IRBT 17 148076 -5
BLKB 20 109333 1
INNV 32 190847 32
WRI 14 200031 1
PDCE 24 292637 3
ABM 17 40361 -3
CPA 18 213264 -3
Average 20.3 170650 3.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.3 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $336 million in MTH’s case. InnovAge Holding Corp. (NASDAQ:INNV) is the most popular stock in this table. On the other hand Weingarten Realty Investors (NYSE:WRI) is the least popular one with only 14 bullish hedge fund positions. Meritage Homes Corp (NYSE:MTH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MTH is 46. 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately MTH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MTH were disappointed as the stock returned -3.9% since the end of March (through 7/16) 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.

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