Should You Avoid M.D.C. Holdings, Inc. (MDC)?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

M.D.C. Holdings, Inc. (NYSE:MDC) has seen a decrease in activity from the world’s largest hedge funds in recent months. There were 12 hedge funds in our database with MDC holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Oclaro, Inc. (NASDAQ:OCLR), Cubic Corporation (NYSE:CUB), and Franklin Street Properties Corp. (NYSEAMEX:FSP) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, let’s take a look at the recent action encompassing M.D.C. Holdings, Inc. (NYSE:MDC).

How have hedgies been trading M.D.C. Holdings, Inc. (NYSE:MDC)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MDC over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Royce & Associates, led by Chuck Royce, holds the most valuable position in M.D.C. Holdings, Inc. (NYSE:MDC). Royce & Associates has a $14.8 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Millennium Management, one of the biggest hedge funds in the world, which holds a $9 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions consist of Steve Leonard’s Pacifica Capital Investments, John Thiessen’s Vertex One Asset Management and Greg Poole’s Echo Street Capital Management. We should note that none of these elite funds are among our list of the 100 best performing elite funds which is based on the performance of their 13F long positions in non-microcap stocks.