Should You Buy KB Home (KBH)?

The government requires hedge funds and wealthy investors with over a certain portfolio size to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30. We at Insider Monkey have made an extensive database of more than 700 of those elite funds and prominent investors’ filings. In this article, we analyze how these elite funds and prominent investors traded KB Home (NYSE:KBH) based on those filings.

Is KB Home (NYSE:KBH) going to take off soon? The smart money is turning bullish. The number of bullish hedge fund bets moved up by 3 in recent months. Our calculations also showed that kbh isn’t among the 30 most popular stocks among hedge funds. KBH was in 17 hedge funds’ portfolios at the end of September. There were 14 hedge funds in our database with KBH positions at the end of the previous quarter.

Today there are several gauges stock market investors can use to appraise publicly traded companies. A pair of the less known gauges are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass their index-focused peers by a significant amount (see the details here).

Clint Carlson, Carlson Capital

Let’s check out the new hedge fund action regarding KB Home (NYSE:KBH).

How are hedge funds trading KB Home (NYSE:KBH)?

At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from the second quarter of 2018. By comparison, 17 hedge funds held shares or bullish call options in KBH heading into this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with KBH Positions

More specifically, AQR Capital Management was the largest shareholder of KB Home (NYSE:KBH), with a stake worth $117.7 million reported as of the end of September. Trailing AQR Capital Management was Fisher Asset Management, which amassed a stake valued at $79 million. Millennium Management, Renaissance Technologies, and Carlson Capital were also very fond of the stock, giving the stock large weights in their portfolios.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Carlson Capital, managed by Clint Carlson, created the most outsized position in KB Home (NYSE:KBH). Carlson Capital had $16 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $5 million position during the quarter. The other funds with brand new KBH positions are Steve Cohen’s Point72 Asset Management, Matthew Hulsizer’s PEAK6 Capital Management, and D. E. Shaw’s D E Shaw.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as KB Home (NYSE:KBH) but similarly valued. We will take a look at Premier Financial Bancorp, Inc. (NASDAQ:PFBI), Genworth Financial Inc (NYSE:GNW), Granite Construction Incorporated (NYSE:GVA), and Hudson Ltd. (NYSE:HUD). This group of stocks’ market valuations are closest to KBH’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PFBI 4 15565 1
GNW 22 74106 0
GVA 16 86556 -1
HUD 20 131364 2
Average 15.5 76898 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $331 million in KBH’s case. Genworth Financial Inc (NYSE:GNW) is the most popular stock in this table. On the other hand Premier Financial Bancorp, Inc. (NASDAQ:PFBI) is the least popular one with only 4 bullish hedge fund positions. KB Home (NYSE:KBH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard GNW might be a better candidate to consider a long position.

Disclosure: None. This article was originally published at Insider Monkey.