Smart Money is Moving Out of KB Home (KBH)

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It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards KB Home (NYSE:KBH) during the quarter below.

KB Home (NYSE:KBH) has experienced a decrease in activity from the world’s largest hedge funds in recent months. KBH was in 19 hedge funds’ portfolios at the end of September. There were 25 hedge funds in our database with KBH positions 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 Vonage Holdings Corp. (NYSE:VG), Cohen & Steers, Inc. (NYSE:CNS), and Northwest Natural Gas Co (NYSE:NWN) to gather more data points.

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To most shareholders, hedge funds are viewed as slow, outdated financial tools of yesteryear. While there are more than an 8,000 funds in operation at the moment, we choose to focus on the elite of this group, approximately 700 funds. Most estimates calculate that this group of people orchestrate the lion’s share of the smart money’s total asset base, and by monitoring their matchless picks, Insider Monkey has determined a few investment strategies that have historically outstripped the broader indices. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, we’re going to review the latest action regarding KB Home (NYSE:KBH).

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

Heading into Q4, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 24% from the previous quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings significantly (or had already accumulated large positions).

According to Insider Monkey’s hedge fund database, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in KB Home (NYSE:KBH). Fisher Asset Management has a $47.9 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Balyasny Asset Management, managed by Dmitry Balyasny, which holds a $47.8 million position; 0.4% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions comprise Steve Cohen’s Point72 Asset Management, and Israel Englander’s Millennium Management.

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