Is Legacy Housing Corporation (LEGH) A Good Stock To Buy Now?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Legacy Housing Corporation (NASDAQ:LEGH).

Is Legacy Housing Corporation (LEGH) a good stock to buy now? Investors who are in the know were getting more bullish. The number of bullish hedge fund bets went up by 3 in recent months. Legacy Housing Corporation (NASDAQ:LEGH) was in 7 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 7. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LEGH 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.

Roger Ibbotson of Zebra Capital Management

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 we’re going to take a look at the latest hedge fund action regarding Legacy Housing Corporation (NASDAQ:LEGH).

What does smart money think about Legacy Housing Corporation (NASDAQ:LEGH)?

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 75% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LEGH over the last 21 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

The largest stake in Legacy Housing Corporation (NASDAQ:LEGH) was held by Voss Capital, which reported holding $6.8 million worth of stock at the end of September. It was followed by Royce & Associates with a $5.3 million position. Other investors bullish on the company included Yacktman Asset Management, AWH Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Voss Capital allocated the biggest weight to Legacy Housing Corporation (NASDAQ:LEGH), around 3.87% of its 13F portfolio. AWH Capital is also relatively very bullish on the stock, designating 0.6 percent of its 13F equity portfolio to LEGH.

As one would reasonably expect, key money managers have been driving this bullishness. AWH Capital, managed by Austin Wiggins Hopper, assembled the largest position in Legacy Housing Corporation (NASDAQ:LEGH). AWH Capital had $0.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.3 million position during the quarter. The only other fund with a brand new LEGH position is Roger Ibbotson’s Zebra Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Legacy Housing Corporation (NASDAQ:LEGH) but similarly valued. These stocks are Gladstone Land Corporation (NASDAQ:LAND), MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), Blue Bird Corporation (NASDAQ:BLBD), Amalgamated Bank (NASDAQ:AMAL), Magenta Therapeutics, Inc. (NASDAQ:MGTA), Ituran Location and Control Ltd. (NASDAQ:ITRN), and City Office REIT Inc (NYSE:CIO). This group of stocks’ market caps are similar to LEGH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LAND 7 10307 0
MCFT 17 109222 -4
BLBD 11 19363 1
AMAL 9 21646 0
MGTA 16 43142 -6
ITRN 7 43042 -2
CIO 15 29144 2
Average 11.7 39409 -1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.7 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $14 million in LEGH’s case. MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) is the most popular stock in this table. On the other hand Gladstone Land Corporation (NASDAQ:LAND) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Legacy Housing Corporation (NASDAQ:LEGH) is even less popular than LAND. Our overall hedge fund sentiment score for LEGH is 38. 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. Hedge funds dodged a bullet by taking a bearish stance towards LEGH. Our calculations showed that the top 20 most popular hedge fund stocks 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 but managed to beat the market again by 16 percentage points. Unfortunately LEGH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); LEGH investors were disappointed as the stock returned 8.6% 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 so far in 2020.

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