Were Hedge Funds Right About D.R. Horton, Inc. (DHI)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded D.R. Horton, Inc. (NYSE:DHI) based on those filings.

D.R. Horton, Inc. (NYSE:DHI) shareholders have witnessed an increase in hedge fund interest recently. D.R. Horton, Inc. (NYSE:DHI) was in 64 hedge funds’ portfolios at the end of December. The all time high for this statistic is 66. There were 62 hedge funds in our database with DHI holdings at the end of September. Our calculations also showed that DHI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. Now we’re going to take a glance at the key hedge fund action encompassing D.R. Horton, Inc. (NYSE:DHI).

Do Hedge Funds Think DHI Is A Good Stock To Buy Now?

At the end of December, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the third quarter of 2020. On the other hand, there were a total of 51 hedge funds with a bullish position in DHI a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Is DHI A Good Stock To Buy?

The largest stake in D.R. Horton, Inc. (NYSE:DHI) was held by Egerton Capital Limited, which reported holding $728 million worth of stock at the end of December. It was followed by Soros Fund Management with a $255.3 million position. Other investors bullish on the company included Greenhaven Associates, Millennium Management, and Echo Street Capital Management. In terms of the portfolio weights assigned to each position Land & Buildings Investment Management allocated the biggest weight to D.R. Horton, Inc. (NYSE:DHI), around 5.57% of its 13F portfolio. Mountaineer Partners Management is also relatively very bullish on the stock, setting aside 5.18 percent of its 13F equity portfolio to DHI.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, created the largest position in D.R. Horton, Inc. (NYSE:DHI). Citadel Investment Group had $69.9 million invested in the company at the end of the quarter.  Renaissance Technologies also initiated a $50.7 million position during the quarter. The following funds were also among the new DHI investors: Dmitry Balyasny’s Balyasny Asset Management, John Smith Clark’s Southpoint Capital Advisors, and Michael Gelband’s ExodusPoint Capital.

Let’s check out hedge fund activity in other stocks similar to D.R. Horton, Inc. (NYSE:DHI). We will take a look at Weyerhaeuser Co. (NYSE:WY), ZTO Express (Cayman) Inc. (NYSE:ZTO), PG&E Corporation (NYSE:PCG), Verisign, Inc. (NASDAQ:VRSN), Keysight Technologies Inc (NYSE:KEYS), ArcelorMittal (NYSE:MT), and Coupa Software Incorporated (NASDAQ:COUP). All of these stocks’ market caps are similar to DHI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WY 40 614210 -1
ZTO 17 426129 -5
PCG 66 6651557 -10
VRSN 47 6421904 1
KEYS 27 592599 -9
MT 18 511254 -2
COUP 62 4125119 12
Average 39.6 2763253 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.6 hedge funds with bullish positions and the average amount invested in these stocks was $2763 million. That figure was $1923 million in DHI’s case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand ZTO Express (Cayman) Inc. (NYSE:ZTO) is the least popular one with only 17 bullish hedge fund positions. D.R. Horton, Inc. (NYSE:DHI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DHI is 84.1. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on DHI as the stock returned 43% since the end of Q4 (through 4/30) 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.