Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in NVR, Inc. (NYSE:NVR)? The smart money sentiment can provide an answer to this question.
Is NVR stock a buy or sell? Money managers were taking an optimistic view. The number of long hedge fund positions rose by 4 in recent months. NVR, Inc. (NYSE:NVR) was in 46 hedge funds’ portfolios at the end of December. The all time high for this statistic is 42. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NVR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 124 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, 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 hydrogen fuel cell 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 (or at the end of this article). Now let’s check out the fresh hedge fund action surrounding NVR, Inc. (NYSE:NVR).
Do Hedge Funds Think NVR Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NVR over the last 22 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Diamond Hill Capital, managed by Ric Dillon, holds the biggest position in NVR, Inc. (NYSE:NVR). Diamond Hill Capital has a $435.7 million position in the stock, comprising 2.1% of its 13F portfolio. The second most bullish fund manager is Egerton Capital Limited, managed by John Armitage, which holds a $229.6 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of Robert Bishop’s Impala Asset Management, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Impala Asset Management allocated the biggest weight to NVR, Inc. (NYSE:NVR), around 7.54% of its 13F portfolio. Manor Road Capital Partners is also relatively very bullish on the stock, dishing out 7.29 percent of its 13F equity portfolio to NVR.
Consequently, key money managers were leading the bulls’ herd. Anomaly Capital Management, managed by Ben Jacobs, established the biggest position in NVR, Inc. (NYSE:NVR). Anomaly Capital Management had $22.2 million invested in the company at the end of the quarter. Constantine Mamakos’s Venator Management LLC also initiated a $7.7 million position during the quarter. The other funds with new positions in the stock are Louis Bacon’s Moore Global Investments, Stephen Mykijewycz’s Masterton Capital Management, and The Motley Fool’s 1623 Capital.
Let’s check out hedge fund activity in other stocks similar to NVR, Inc. (NYSE:NVR). We will take a look at Cheniere Energy, Inc. (NYSE:LNG), Domino’s Pizza, Inc. (NYSE:DPZ), Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), Suzano S.A. (NYSE:SUZ), IDEX Corporation (NYSE:IEX), Extra Space Storage, Inc. (NYSE:EXR), and Leidos Holdings Inc (NYSE:LDOS). This group of stocks’ market caps match NVR’s market cap.
|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 27.4 hedge funds with bullish positions and the average amount invested in these stocks was $777 million. That figure was $1430 million in NVR’s case. Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) is the most popular stock in this table. On the other hand Suzano S.A. (NYSE:SUZ) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks NVR, Inc. (NYSE:NVR) is more popular among hedge funds. Our overall hedge fund sentiment score for NVR is 89. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on NVR as the stock returned 8.7% since the end of December (through 3/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.