The market has been volatile in the fourth quarter as the Federal Reserve continued its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds' movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of American Homes 4 Rent (NYSE:AMH) and find out how it is affected by hedge funds' moves.
American Homes 4 Rent (NYSE:AMH) has experienced a decrease in support from the world's most elite money managers of late. AMH was in 18 hedge funds' portfolios at the end of December. There were 20 hedge funds in our database with AMH positions at the end of the previous quarter. Our calculations also showed that AMH isn't among the 30 most popular stocks among hedge funds.
In the 21st century investor’s toolkit there are a large number of metrics investors have at their disposal to evaluate publicly traded companies. Two of the less known metrics are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the top money managers can beat the market by a significant margin (see the details here).
Let's review the latest hedge fund action surrounding American Homes 4 Rent (NYSE:AMH).
Hedge fund activity in American Homes 4 Rent (NYSE:AMH)
At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AMH over the last 14 quarters. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Greg Poole's Echo Street Capital Management has the number one position in American Homes 4 Rent (NYSE:AMH), worth close to $93.7 million, amounting to 2.4% of its total 13F portfolio. Sitting at the No. 2 spot is Long Pond Capital, led by John Khoury, holding a $74.8 million position; 2.9% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism include Jeffrey Furber's AEW Capital Management, Dmitry Balyasny's Balyasny Asset Management and Ken Griffin's Citadel Investment Group.
Due to the fact that American Homes 4 Rent (NYSE:AMH) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there exists a select few hedgies who sold off their positions entirely by the end of the third quarter. Interestingly, Noam Gottesman's GLG Partners dropped the biggest stake of the "upper crust" of funds tracked by Insider Monkey, totaling about $8.9 million in stock. Matthew Tewksbury's fund, Stevens Capital Management, also cut its stock, about $4.3 million worth. These moves are important to note, as total hedge fund interest was cut by 2 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as American Homes 4 Rent (NYSE:AMH) but similarly valued. These stocks are Exelixis, Inc. (NASDAQ:EXEL), Medical Properties Trust, Inc. (NYSE:MPW), LG Display Co Ltd. (NYSE:LPL), and Enable Midstream Partners LP (NYSE:ENBL). This group of stocks' market valuations resemble AMH's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXEL,24,668199,1 MPW,16,224506,6 LPL,5,19245,-1 ENBL,4,2646,0 Average,12.25,228649,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $229 million. That figure was $431 million in AMH's case. Exelixis, Inc. (NASDAQ:EXEL) is the most popular stock in this table. On the other hand Enable Midstream Partners LP (NYSE:ENBL) is the least popular one with only 4 bullish hedge fund positions. American Homes 4 Rent (NYSE:AMH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately AMH wasn't in this group. Hedge funds that bet on AMH were disappointed as the stock returned 15.8% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.