Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Here’s What Hedge Funds Think About D.R. Horton, Inc. (DHI)

The market has been volatile in the fourth quarter as the Federal Reserve continued its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of D.R. Horton, Inc. (NYSE:DHI) and find out how it is affected by hedge funds’ moves.

D.R. Horton, Inc. (NYSE:DHI) shareholders have witnessed a decrease in enthusiasm from smart money of late. DHI was in 47 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 49 hedge funds in our database with DHI holdings at the end of the previous quarter. Our calculations also showed that DHI isn’t among the 30 most popular stocks among hedge funds.

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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ricky Sandler, Eminence Capital

We’re going to take a look at the new hedge fund action surrounding D.R. Horton, Inc. (NYSE:DHI).

How have hedgies been trading D.R. Horton, Inc. (NYSE:DHI)?

Heading into the first quarter of 2019, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. On the other hand, there were a total of 44 hedge funds with a bullish position in DHI a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

DHI_mar2019

Among these funds, Long Pond Capital held the most valuable stake in D.R. Horton, Inc. (NYSE:DHI), which was worth $448.2 million at the end of the third quarter. On the second spot was D1 Capital Partners which amassed $363.1 million worth of shares. Moreover, Greenhaven Associates, Millennium Management, and Renaissance Technologies were also bullish on D.R. Horton, Inc. (NYSE:DHI), allocating a large percentage of their portfolios to this stock.

Because D.R. Horton, Inc. (NYSE:DHI) has faced a decline in interest from hedge fund managers, it’s safe to say that there were a few funds who sold off their positions entirely last quarter. At the top of the heap, Joshua Kaufman and Craig Nerenberg’s Brenner West Capital Partners sold off the largest position of the 700 funds tracked by Insider Monkey, valued at about $52.3 million in stock. John Brennan’s fund, Sirios Capital Management, also cut its stock, about $47.4 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as D.R. Horton, Inc. (NYSE:DHI) but similarly valued. These stocks are Lennar Corporation (NYSE:LEN), Annaly Capital Management, Inc. (NYSE:NLY), MGM Resorts International (NYSE:MGM), and Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF). All of these stocks’ market caps resemble DHI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LEN 62 1693184 -4
NLY 16 160541 -7
MGM 46 1590466 -3
KOF 6 476689 -2
Average 32.5 980220 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $980 million. That figure was $1783 million in DHI’s case. Lennar Corporation (NYSE:LEN) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 6 bullish hedge fund positions. D.R. Horton, Inc. (NYSE:DHI) is not the most popular stock in this group but hedge fund interest is still above average. 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on DHI, though not to the same extent, as the stock returned 18.1% and outperformed the market as well.

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

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading...