We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards Lennar Corporation (NYSE:LEN).
Is Lennar Corporation (NYSE:LEN) a good investment today? The best stock pickers are betting on the stock. The number of bullish hedge fund bets improved by 4 recently. Our calculations also showed that LEN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
If you’d ask most stock holders, hedge funds are seen as underperforming, old financial tools of yesteryear. While there are more than 8000 funds trading at present, Our experts choose to focus on the crème de la crème of this club, approximately 850 funds. It is estimated that this group of investors manage bulk of the smart money’s total capital, and by keeping track of their unrivaled picks, Insider Monkey has unsheathed numerous investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Ricky Sandler of Eminence Capital
We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. Federal Reserve and Central Banks all around world are printing money like there is no tomorrow, so we check out this this precious metals expert’s stock pick. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the recent hedge fund action regarding Lennar Corporation (NYSE:LEN).
How are hedge funds trading Lennar Corporation (NYSE:LEN)?
At the end of the fourth quarter, a total of 63 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LEN over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Greenhaven Associates was the largest shareholder of Lennar Corporation (NYSE:LEN), with a stake worth $507.6 million reported as of the end of September. Trailing Greenhaven Associates was Eminence Capital, which amassed a stake valued at $155.7 million. Brave Warrior Capital, D E Shaw, and Miller Value Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Greenhaven Associates allocated the biggest weight to Lennar Corporation (NYSE:LEN), around 11.32% of its 13F portfolio. Abrams Bison Investments is also relatively very bullish on the stock, designating 10.03 percent of its 13F equity portfolio to LEN.
As aggregate interest increased, key hedge funds have been driving this bullishness. Renaissance Technologies, founded by Jim Simons, initiated the most valuable position in Lennar Corporation (NYSE:LEN). Renaissance Technologies had $36.2 million invested in the company at the end of the quarter. Malcolm Levine’s Dendur Capital also made a $13 million investment in the stock during the quarter. The other funds with brand new LEN positions are Robert B. Gillam’s McKinley Capital Management, Michael Gelband’s ExodusPoint Capital, and Matthew Tewksbury’s Stevens Capital Management.
Let’s check out hedge fund activity in other stocks similar to Lennar Corporation (NYSE:LEN). These stocks are WPP plc (NYSE:WPP), Citizens Financial Group Inc (NYSE:CFG), Omnicom Group Inc. (NYSE:OMC), and Concho Resources Inc. (NYSE:CXO). All of these stocks’ market caps resemble LEN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WPP | 7 | 49982 | 4 |
| CFG | 42 | 1814103 | -1 |
| OMC | 22 | 480889 | -5 |
| CXO | 39 | 763574 | 9 |
| Average | 27.5 | 777137 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $777 million. That figure was $1862 million in LEN’s case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand WPP plc (NYSE:WPP) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Lennar Corporation (NYSE:LEN) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 1.0% in 2020 through April 20th and still beat the market by 11 percentage points. Unfortunately LEN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LEN were disappointed as the stock returned -28% during the three months of 2020 (through April 20th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
