Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Century Communities, Inc (NYSE:CCS)? The smart money sentiment can provide an answer to this question.
Is CCS a good stock to buy now? Century Communities, Inc (NYSE:CCS) has seen a decrease in hedge fund sentiment in recent months. Century Communities, Inc (NYSE:CCS) was in 20 hedge funds’ portfolios at the end of September. The all time high for this statistic is 24. Our calculations also showed that CCS 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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. Keeping this in mind we’re going to check out the key hedge fund action regarding Century Communities, Inc (NYSE:CCS).
Do Hedge Funds Think CCS Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CCS over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Basswood Capital was the largest shareholder of Century Communities, Inc (NYSE:CCS), with a stake worth $43.4 million reported as of the end of September. Trailing Basswood Capital was Driehaus Capital, which amassed a stake valued at $25.2 million. Atika Capital, Capital Growth Management, and Oaktree Capital 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 Basswood Capital allocated the biggest weight to Century Communities, Inc (NYSE:CCS), around 3.6% of its 13F portfolio. Lyon Street Capital is also relatively very bullish on the stock, designating 2.82 percent of its 13F equity portfolio to CCS.
Due to the fact that Century Communities, Inc (NYSE:CCS) has experienced bearish sentiment from the smart money, we can see that there was a specific group of hedgies who sold off their full holdings by the end of the third quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management sold off the biggest investment of the “upper crust” of funds tracked by Insider Monkey, totaling close to $23.2 million in stock, and Richard S. Meisenberg’s ACK Asset Management was right behind this move, as the fund dropped about $5 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Century Communities, Inc (NYSE:CCS). We will take a look at SiTime Corporation (NASDAQ:SITM), YPF Sociedad Anonima (NYSE:YPF), OSI Systems, Inc. (NASDAQ:OSIS), Freedom Holding Corp. (NASDAQ:FRHC), PQ Group Holdings Inc. (NYSE:PQG), ALX Oncology Holdings Inc. (NASDAQ:ALXO), and Two Harbors Investment Corp (NYSE:TWO). All of these stocks’ market caps match CCS’s market cap.
|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 10.4 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $138 million in CCS’s case. OSI Systems, Inc. (NASDAQ:OSIS) is the most popular stock in this table. On the other hand YPF Sociedad Anonima (NYSE:YPF) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Century Communities, Inc (NYSE:CCS) is more popular among hedge funds. Our overall hedge fund sentiment score for CCS is 79. 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. Unfortunately CCS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CCS were disappointed as the stock returned 0.5% since the end of the third quarter (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.