Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Hedge fund interest in LGI Homes Inc (NASDAQ:LGIH) shares was flat during the third quarter. This is usually a negative indicator. 10 hedge funds that we track owned the stock on September 30, same as on June 30. At the end of this article we will also compare LGIH to other stocks including Orthofix International NV (NASDAQ:OFIX), PHH Corporation (NYSE:PHH), and Re/Max Holdings Inc (NYSE:RMAX) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How have hedgies been trading LGI Homes Inc (NASDAQ:LGIH)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LGIH over the last 5 quarters, which shows a general downtrend in ownership. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Ken Heebner’s Capital Growth Management has the most valuable position in LGI Homes Inc (NASDAQ:LGIH), worth close to $23.8 million, corresponding to 1.1% of its total 13F portfolio. The second largest stake is held by Robert Hockett of Covalent Capital Partners holding a $13.7 million position; 5.3% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions comprise Douglas Dethy’s DC Capital Partners, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-micro-cap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually got rid of their positions entirely. It’s worth mentioning that Ken Griffin’s Citadel Investment Group got rid of the biggest position of all the hedgies followed by Insider Monkey, valued at an estimated $1 million in call options. John H Lewis’ fund, Osmium Partners, also cut its stock, about $0.3 million worth.
Let’s check out hedge fund activity in other stocks similar to LGI Homes Inc (NASDAQ:LGIH). We will take a look at Orthofix International NV (NASDAQ:OFIX), PHH Corporation (NYSE:PHH), Re/Max Holdings Inc (NYSE:RMAX), and Canadian Solar Inc. (NASDAQ:CSIQ). This group of stocks’ market values are closest to LGIH’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $151 million. That figure was $55 million in LGIH’s case. Orthofix International NV (NASDAQ:OFIX) is the most popular stock in this table. On the other hand Re/Max Holdings Inc (NYSE:RMAX) is the least popular one with only 4 bullish hedge fund positions. LGI Homes Inc (NASDAQ:LGIH) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard OFIX might be a better candidate to consider taking a long position in.