Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards NVR, Inc. (NYSE:NVR) changed recently.
Is NVR a good stock to buy? NVR, Inc. (NYSE:NVR) was in 28 hedge funds’ portfolios at the end of June. The all time high for this statistic is 46. NVR investors should be aware of a decrease in hedge fund interest in recent months. There were 39 hedge funds in our database with NVR positions at the end of the first quarter. Our calculations also showed that NVR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Tom Gayner of Markel Gayner Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s view the new hedge fund action regarding NVR, Inc. (NYSE:NVR).
Do Hedge Funds Think NVR Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -28% from the first quarter of 2020. By comparison, 39 hedge funds held shares or bullish call options in NVR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ric Dillon’s Diamond Hill Capital has the biggest position in NVR, Inc. (NYSE:NVR), worth close to $589.7 million, accounting for 2.2% of its total 13F portfolio. The second largest stake is held by Impala Asset Management, led by Robert Bishop, holding a $82.2 million position; 5.5% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism include Francois Rochon’s Giverny Capital, Cliff Asness’s AQR Capital Management and Tom Gayner’s Markel Gayner Asset Management. In terms of the portfolio weights assigned to each position Manor Road Capital Partners allocated the biggest weight to NVR, Inc. (NYSE:NVR), around 7.3% of its 13F portfolio. Guardian Point Capital is also relatively very bullish on the stock, designating 5.64 percent of its 13F equity portfolio to NVR.
Seeing as NVR, Inc. (NYSE:NVR) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there were a few funds who were dropping their full holdings last quarter. It’s worth mentioning that John Armitage’s Egerton Capital Limited cut the biggest position of the 750 funds watched by Insider Monkey, comprising an estimated $110.9 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also cut its stock, about $28.5 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 11 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as NVR, Inc. (NYSE:NVR) but similarly valued. We will take a look at Healthpeak Properties, Inc. (NYSE:PEAK), Bentley Systems, Incorporated (NASDAQ:BSY), Boston Properties, Inc. (NYSE:BXP), Farfetch Limited (NYSE:FTCH), Affirm Holdings, Inc. (NASDAQ:AFRM), Raymond James Financial, Inc. (NYSE:RJF), and Duke Realty Corporation (NYSE:DRE). This group of stocks’ market caps resemble NVR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PEAK | 22 | 119796 | 4 |
| BSY | 17 | 81427 | -5 |
| BXP | 19 | 1397759 | -8 |
| FTCH | 63 | 4253088 | 6 |
| AFRM | 25 | 823640 | -7 |
| RJF | 29 | 662093 | -4 |
| DRE | 15 | 49169 | -5 |
| Average | 27.1 | 1055282 | -2.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $1055 million. That figure was $1093 million in NVR’s case. Farfetch Limited (NYSE:FTCH) is the most popular stock in this table. On the other hand Duke Realty Corporation (NYSE:DRE) is the least popular one with only 15 bullish hedge fund positions. NVR, Inc. (NYSE:NVR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NVR is 25.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately NVR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NVR were disappointed as the stock returned -0.1% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
