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Were Hedge Funds Right About M/I Homes Inc (MHO)?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of M/I Homes Inc (NYSE:MHO).

Is M/I Homes Inc (NYSE:MHO) a cheap stock to buy now? Money managers are betting on the stock. The number of long hedge fund positions advanced by 1 in recent months. Our calculations also showed that MHO 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). MHO was in 20 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 19 hedge funds in our database with MHO positions at the end of the previous quarter.

Matthew Lindenbaum Basswood Capital

Matthew Lindenbaum of Basswood Capital

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind let’s view the key hedge fund action encompassing M/I Homes Inc (NYSE:MHO).

How have hedgies been trading M/I Homes Inc (NYSE:MHO)?

At Q4’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MHO over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

More specifically, Arrowstreet Capital was the largest shareholder of M/I Homes Inc (NYSE:MHO), with a stake worth $18 million reported as of the end of September. Trailing Arrowstreet Capital was AQR Capital Management, which amassed a stake valued at $9.5 million. Winton Capital Management, Royce & Associates, and Basswood Capital 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 Algert Coldiron Investors allocated the biggest weight to M/I Homes Inc (NYSE:MHO), around 0.66% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, designating 0.47 percent of its 13F equity portfolio to MHO.

Now, some big names have jumped into M/I Homes Inc (NYSE:MHO) headfirst. Tudor Investment Corp, managed by Paul Tudor Jones, established the biggest position in M/I Homes Inc (NYSE:MHO). Tudor Investment Corp had $0.5 million invested in the company at the end of the quarter. Qing Li’s Sciencast Management also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners and Noam Gottesman’s GLG Partners.

Let’s now take a look at hedge fund activity in other stocks similar to M/I Homes Inc (NYSE:MHO). These stocks are Realogy Holdings Corp (NYSE:RLGY), Sculptor Capital Management, Inc. (NYSE:SCU), Delphi Technologies PLC (NYSE:DLPH), and Callon Petroleum Company (NYSE:CPE). This group of stocks’ market caps resemble MHO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RLGY 30 478410 5
SCU 12 85038 1
DLPH 17 155844 -4
CPE 27 226348 -2
Average 21.5 236410 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $236 million. That figure was $72 million in MHO’s case. Realogy Holdings Corp (NYSE:RLGY) is the most popular stock in this table. On the other hand Sculptor Capital Management, Inc. (NYSE:SCU) is the least popular one with only 12 bullish hedge fund positions. M/I Homes Inc (NYSE:MHO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately MHO wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); MHO investors were disappointed as the stock returned -39.1% during the same time period 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.
5 Most Popular Stocks Among Hedge Funds
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.

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