Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like M/I Homes Inc (NYSE:MHO).
M/I Homes Inc (NYSE:MHO) investors should be aware of an increase in enthusiasm from smart money in recent months. There were 8 hedge funds in our database with MHO positions at the end of the second quarter, 1 fewer than there were at the end of the third quarter. At the end of this article we will also compare MHO to other stocks including Bojangles Inc (NASDAQ:BOJA), Regis Corporation (NYSE:RGS), and Rayonier Advanced Materials Inc (NYSE:RYAM) 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 are hedge funds trading M/I Homes Inc (NYSE:MHO)?
Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 13% increase from the second quarter of 2016. The graph below displays the number of hedge funds with bullish positions in MHO over the last 5 quarters, which fell by 50% during the 3-quarter period prior to the third quarter of 2016. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the number one position in M/I Homes Inc (NYSE:MHO), worth close to $13.2 million. On Royce & Associates’ heels is Gratia Capital, led by Steve Pei, holding a $12.7 million position; 4.2% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism encompass Millennium Management, one of the biggest hedge funds in the world, Robert Hockett’s Covalent Capital Partners, and David E. Shaw’s D E Shaw. 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.