Is New Home Company Inc (NWHM) A Good Stock To Buy?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track more than 700 prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile gigantic failures like hedge funds’ recent losses in Valeant. Let’s take a closer look at what the funds we track think about New Home Company Inc (NYSE:NWHM) in this article.

New Home Company Inc (NYSE:NWHM) investors should be aware of a decrease in support from the world’s most elite money managers in recent months. At the end of this article, we will also compare New Home Company Inc (NYSE:NWHM) to other stocks including Trupanion Inc (NYSE:TRUP), Gladstone Investment Corporation (NASDAQ:GAIN), and Second Sight Medical Products Inc (NASDAQ:EYES) to get a better sense of its popularity.

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Now, we’re going to check out the new action surrounding New Home Company Inc (NYSE:NWHM).

How are hedge funds trading New Home Company Inc (NYSE:NWHM)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 20% from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Tom Brown’s Second Curve Capital had the biggest position in New Home Company Inc (NYSE:NWHM), worth close to $18 million, accounting for 8.1% of its total 13F portfolio. On Second Curve Capital’s heels is Robert Hockett of Covalent Capital Partners, with a $17.2 million position; 3.6% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions include Chuck Royce’s mutual fund, Royce & Associates, Joseph A. Jolson’s Harvest Capital Strategies and .

Because New Home Company Inc (NYSE:NWHM) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedgies that decided to sell off their full holdings at the end of the third quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group sold off the biggest investment of the 700 funds monitored by Insider Monkey, comprising about $0.3 million in stock, and Richard Driehaus of Driehaus Capital was right behind this move, as the fund dropped about $0.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 at the end of the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as New Home Company Inc (NYSE:NWHM) but similarly valued. We will take a look at Trupanion Inc (NYSE:TRUP), Gladstone Investment Corporation (NASDAQ:GAIN), Second Sight Medical Products Inc (NASDAQ:EYES), and SeaChange International (NASDAQ:SEAC). This group of stocks’ market valuations are similar to New Home Company Inc (NYSE:NWHM)’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRUP 5 16570 -3
GAIN 7 2648 1
EYES 4 839 1
SEAC 11 49606 -3

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. SeaChange International (NASDAQ:SEAC) is the most popular stock in this table. On the other hand, Second Sight Medical Products Inc (NASDAQ:EYES) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks New Home Company Inc (NYSE:NWHM) is even less popular than Second Sight Medical Products Inc (NASDAQ:EYES). Considering that hedge funds aren’t fond of this stock, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.