At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Beazer Homes USA, Inc. (NYSE:BZH).
Is BZH a good stock to buy now? Beazer Homes USA, Inc. (NYSE:BZH) investors should pay attention to a decrease in enthusiasm from smart money recently. Beazer Homes USA, Inc. (NYSE:BZH) was in 15 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 20. There were 19 hedge funds in our database with BZH holdings at the end of June. Our calculations also showed that BZH isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now let’s check out the key hedge fund action encompassing Beazer Homes USA, Inc. (NYSE:BZH).
Do Hedge Funds Think BZH Is A Good Stock To Buy Now?
At the end of September, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in BZH a year ago. 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, Royce & Associates held the most valuable stake in Beazer Homes USA, Inc. (NYSE:BZH), which was worth $12.9 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $5.4 million worth of shares. Whitebox Advisors, AQR Capital Management, and Saba 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 Royce & Associates allocated the biggest weight to Beazer Homes USA, Inc. (NYSE:BZH), around 0.14% of its 13F portfolio. Whitebox Advisors is also relatively very bullish on the stock, designating 0.12 percent of its 13F equity portfolio to BZH.
Since Beazer Homes USA, Inc. (NYSE:BZH) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedgies who were dropping their full holdings in the third quarter. Interestingly, John M. Angelo and Michael L. Gordon’s Angelo Gordon & Co sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $11.7 million in stock, and Renaissance Technologies was right behind this move, as the fund said goodbye to about $1.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 4 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Beazer Homes USA, Inc. (NYSE:BZH) but similarly valued. These stocks are Dorian LPG Ltd (NYSE:LPG), International Seaways, Inc. (NYSE:INSW), China Online Education Group (NYSE:COE), CBTX, Inc. (NASDAQ:CBTX), Amryt Pharma plc (NASDAQ:AMYT), REX American Resources Corp (NYSE:REX), and Laird Superfood, Inc. (NYSE:LSF). This group of stocks’ market values match BZH’s market value.
|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 9.7 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $31 million in BZH’s case. International Seaways, Inc. (NYSE:INSW) is the most popular stock in this table. On the other hand China Online Education Group (NYSE:COE) 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 73.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on BZH as the stock returned 12.9% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.