In this article we will take a look at whether hedge funds think PulteGroup, Inc. (NYSE:PHM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is PHM stock a buy or sell? PulteGroup, Inc. (NYSE:PHM) has seen a decrease in activity from the world’s largest hedge funds recently. PulteGroup, Inc. (NYSE:PHM) was in 40 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 43. There were 43 hedge funds in our database with PHM positions at the end of the third quarter. Our calculations also showed that PHM isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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Do Hedge Funds Think PHM Is A Good Stock To Buy Now?
At Q4’s end, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. On the other hand, there were a total of 34 hedge funds with a bullish position in PHM a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in PulteGroup, Inc. (NYSE:PHM), which was worth $165.8 million at the end of the fourth quarter. On the second spot was Long Pond Capital which amassed $137.8 million worth of shares. GLG Partners, Arrowstreet Capital, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Long Pond Capital allocated the biggest weight to PulteGroup, Inc. (NYSE:PHM), around 4.6% of its 13F portfolio. Greenhaven Associates is also relatively very bullish on the stock, earmarking 1.55 percent of its 13F equity portfolio to PHM.
Due to the fact that PulteGroup, Inc. (NYSE:PHM) has faced a decline in interest from the smart money, it’s easy to see that there were a few money managers that elected to cut their entire stakes heading into Q1. At the top of the heap, Ken Heebner’s Capital Growth Management cut the largest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $24.8 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund sold off about $19.2 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 3 funds heading into Q1.
Let’s check out hedge fund activity in other stocks similar to PulteGroup, Inc. (NYSE:PHM). These stocks are Equity Lifestyle Properties, Inc. (NYSE:ELS), Lamb Weston Holdings, Inc. (NYSE:LW), Five9 Inc (NASDAQ:FIVN), Fidelity National Financial Inc (NYSE:FNF), Concho Resources Inc. (NYSE:CXO), WestRock Company (NYSE:WRK), and DENTSPLY SIRONA Inc. (NASDAQ:XRAY). This group of stocks’ market caps are similar to PHM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1035 million. That figure was $1006 million in PHM’s case. Five9 Inc (NASDAQ:FIVN) is the most popular stock in this table. On the other hand Equity Lifestyle Properties, Inc. (NYSE:ELS) is the least popular one with only 24 bullish hedge fund positions. PulteGroup, Inc. (NYSE:PHM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PHM is 64.7. 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 gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on PHM as the stock returned 13.9% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.