Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Tri Pointe Homes, Inc. (NYSE:TPH), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is TPH a good stock to buy? Hedge funds were getting less optimistic. The number of bullish hedge fund positions went down by 2 lately. Tri Pointe Homes, Inc. (NYSE:TPH) was in 26 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 32. Our calculations also showed that TPH isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. With all of this in mind we’re going to take a gander at the key hedge fund action encompassing Tri Pointe Homes, Inc. (NYSE:TPH).
Do Hedge Funds Think TPH Is A Good Stock To Buy Now?
At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in TPH a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Cliff Asness’s AQR Capital Management has the most valuable position in Tri Pointe Homes, Inc. (NYSE:TPH), worth close to $36.6 million, corresponding to 0.1% of its total 13F portfolio. On AQR Capital Management’s heels is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $27.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish encompass Ken Fisher’s Fisher Asset Management, D. E. Shaw’s D E Shaw and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Factorial Partners allocated the biggest weight to Tri Pointe Homes, Inc. (NYSE:TPH), around 0.7% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, dishing out 0.63 percent of its 13F equity portfolio to TPH.
Judging by the fact that Tri Pointe Homes, Inc. (NYSE:TPH) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers who were dropping their full holdings by the end of the first quarter. It’s worth mentioning that Greg Eisner’s Engineers Gate Manager said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, totaling about $1.1 million in stock. Jinghua Yan’s fund, TwinBeech Capital, also cut its stock, about $0.6 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tri Pointe Homes, Inc. (NYSE:TPH) but similarly valued. These stocks are Herman Miller, Inc. (NASDAQ:MLHR), WesBanco, Inc. (NASDAQ:WSBC), MYT Netherlands Parent B.V. (NYSE:MYTE), Magellan Health Inc (NASDAQ:MGLN), Hims & Hers Health, Inc. (NYSE:HIMS), Cinemark Holdings, Inc. (NYSE:CNK), and PubMatic, Inc. (NASDAQ:PUBM). All of these stocks’ market caps resemble TPH’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 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $158 million in TPH’s case. Cinemark Holdings, Inc. (NYSE:CNK) is the most popular stock in this table. On the other hand PubMatic, Inc. (NASDAQ:PUBM) is the least popular one with only 5 bullish hedge fund positions. Tri Pointe Homes, Inc. (NYSE:TPH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TPH is 69.4. 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% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately TPH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TPH were disappointed as the stock returned 2.1% since the end of March (through 7/9) 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.