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 817 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 D.R. Horton, Inc. (NYSE:DHI), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is DHI a good stock to buy now? Prominent investors were getting less bullish. The number of bullish hedge fund positions were cut by 4 lately. D.R. Horton, Inc. (NYSE:DHI) was in 62 hedge funds’ portfolios at the end of September. The all time high for this statistics is 66. Our calculations also showed that DHI 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). There were 66 hedge funds in our database with DHI holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey 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. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy 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 regarding D.R. Horton, Inc. (NYSE:DHI).
What have hedge funds been doing with D.R. Horton, Inc. (NYSE:DHI)?
At the end of the third quarter, a total of 62 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards DHI over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Egerton Capital Limited held the most valuable stake in D.R. Horton, Inc. (NYSE:DHI), which was worth $789.7 million at the end of the third quarter. On the second spot was Greenhaven Associates which amassed $265.2 million worth of shares. Soros Fund Management, GQG Partners, and Echo Street 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 Highline Capital Management allocated the biggest weight to D.R. Horton, Inc. (NYSE:DHI), around 9.49% of its 13F portfolio. Mountaineer Partners Management is also relatively very bullish on the stock, setting aside 6.98 percent of its 13F equity portfolio to DHI.
Judging by the fact that D.R. Horton, Inc. (NYSE:DHI) has experienced declining sentiment from the smart money, it’s safe to say that there was a specific group of hedge funds that decided to sell off their full holdings last quarter. It’s worth mentioning that Patrick Degorce’s Theleme Partners dumped the largest position of all the hedgies watched by Insider Monkey, totaling close to $77.4 million in stock, and Glenn Greenberg’s Brave Warrior Capital was right behind this move, as the fund dropped about $73.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as D.R. Horton, Inc. (NYSE:DHI) but similarly valued. We will take a look at STMicroelectronics N.V. (NYSE:STM), The Travelers Companies Inc (NYSE:TRV), Okta, Inc. (NASDAQ:OKTA), V.F. Corporation (NYSE:VFC), Waste Connections, Inc. (NYSE:WCN), Ball Corporation (NYSE:BLL), and Otis Worldwide Corporation (NYSE:OTIS). All of these stocks’ market caps are similar to DHI’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 35.3 hedge funds with bullish positions and the average amount invested in these stocks was $948 million. That figure was $2137 million in DHI’s case. Otis Worldwide Corporation (NYSE:OTIS) is the most popular stock in this table. On the other hand STMicroelectronics N.V. (NYSE:STM) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks D.R. Horton, Inc. (NYSE:DHI) is more popular among hedge funds. Our overall hedge fund sentiment score for DHI is 79.2. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Unfortunately DHI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DHI were disappointed as the stock returned -8.4% since the end of the third quarter (through 12/2) 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.
Disclosure: None. This article was originally published at Insider Monkey.