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Hedge Funds Have Never Been This Bullish On Green Brick Partners Inc (GRBK)

Abigail Fisher

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Green Brick Partners Inc (NASDAQ:GRBK) based on that data.

Green Brick Partners Inc (NASDAQ:GRBK) has experienced an increase in hedge fund interest of late. Our calculations also showed that GRBK isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_315169" align="aligncenter" width="397"] David Einhorn of Greenlight Capital[/caption]

Greenlight Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to review the key hedge fund action encompassing Green Brick Partners Inc (NASDAQ:GRBK).

What does smart money think about Green Brick Partners Inc (NASDAQ:GRBK)?

Heading into the second quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the fourth quarter of 2019. By comparison, 10 hedge funds held shares or bullish call options in GRBK a year ago. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Among these funds, Greenlight Capital held the most valuable stake in Green Brick Partners Inc (NASDAQ:GRBK), which was worth $194.2 million at the end of the third quarter. On the second spot was Stadium Capital Management which amassed $10 million worth of shares. Diamond Hill Capital, Birch Run Capital, and Ariel Investments 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 Greenlight Capital allocated the biggest weight to Green Brick Partners Inc (NASDAQ:GRBK), around 27.66% of its 13F portfolio. AWH Capital is also relatively very bullish on the stock, earmarking 15.16 percent of its 13F equity portfolio to GRBK.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls' herd. AQR Capital Management, managed by Cliff Asness, initiated the most valuable position in Green Brick Partners Inc (NASDAQ:GRBK). AQR Capital Management had $0.5 million invested in the company at the end of the quarter. Peter Muller's PDT Partners also initiated a $0.1 million position during the quarter. The following funds were also among the new GRBK investors: Greg Eisner's Engineers Gate Manager and Thomas Bailard's Bailard Inc.

Let's also examine hedge fund activity in other stocks similar to Green Brick Partners Inc (NASDAQ:GRBK). We will take a look at Cadiz Inc (NASDAQ:CDZI), Capstead Mortgage Corporation (NYSE:CMO), Sabine Royalty Trust (NYSE:SBR), and nLIGHT, Inc. (NASDAQ:LASR). This group of stocks' market values match GRBK's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CDZI,8,13652,-3 CMO,12,47986,0 SBR,4,13210,-2 LASR,7,23474,1 Average,7.75,24581,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $228 million in GRBK's case. Capstead Mortgage Corporation (NYSE:CMO) is the most popular stock in this table. On the other hand Sabine Royalty Trust (NYSE:SBR) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Green Brick Partners Inc (NASDAQ:GRBK) 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 returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on GRBK as the stock returned 44.1% so far in Q2 (through June 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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