With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Lennar Corporation (NYSE:LEN).
Is LEN a good stock to buy now? Prominent investors were taking an optimistic view. The number of bullish hedge fund positions improved by 5 in recent months. Lennar Corporation (NYSE:LEN) was in 60 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 66. Our calculations also showed that LEN 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 55 hedge funds in our database with LEN holdings at the end of June.
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 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. With all of this in mind let’s review the fresh hedge fund action surrounding Lennar Corporation (NYSE:LEN).
How have hedgies been trading Lennar Corporation (NYSE:LEN)?
At the end of the third quarter, a total of 60 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the second quarter of 2020. On the other hand, there were a total of 59 hedge funds with a bullish position in LEN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Greenhaven Associates was the largest shareholder of Lennar Corporation (NYSE:LEN), with a stake worth $619.7 million reported as of the end of September. Trailing Greenhaven Associates was Theleme Partners, which amassed a stake valued at $131.8 million. Eminence Capital, Fisher Asset Management, and Capital Growth 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 Greenhaven Associates allocated the biggest weight to Lennar Corporation (NYSE:LEN), around 13.62% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, dishing out 6.87 percent of its 13F equity portfolio to LEN.
Consequently, key money managers have jumped into Lennar Corporation (NYSE:LEN) headfirst. Castle Hook Partners, managed by Josh Donfeld and David Rogers, assembled the largest position in Lennar Corporation (NYSE:LEN). Castle Hook Partners had $20.3 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors also initiated a $17.8 million position during the quarter. The other funds with brand new LEN positions are Steven Tananbaum’s GoldenTree Asset Management, Mark Kingdon’s Kingdon Capital, and Scott Bessent’s Key Square Capital Management.
Let’s go over hedge fund activity in other stocks similar to Lennar Corporation (NYSE:LEN). We will take a look at Xilinx, Inc. (NASDAQ:XLNX), Prudential Financial Inc (NYSE:PRU), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), Pinterest, Inc. (NYSE:PINS), ResMed Inc. (NYSE:RMD), Tencent Music Entertainment Group (NYSE:TME), and Aptiv PLC (NYSE:APTV). This group of stocks’ market values are similar to LEN’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 45 hedge funds with bullish positions and the average amount invested in these stocks was $1586 million. That figure was $1740 million in LEN’s case. Pinterest, Inc. (NYSE:PINS) is the most popular stock in this table. On the other hand Tencent Music Entertainment Group (NYSE:TME) is the least popular one with only 24 bullish hedge fund positions. Lennar Corporation (NYSE:LEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LEN is 69.4. 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. 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 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 beat the market again by 16 percentage points. Unfortunately LEN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LEN were disappointed as the stock returned -12.6% since the end of September (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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.