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After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Legacy Housing Corporation (NASDAQ:LEGH).
Legacy Housing Corporation (NASDAQ:LEGH) was in 4 hedge funds' portfolios at the end of September. LEGH has seen an increase in support from the world's most elite money managers recently. There were 3 hedge funds in our database with LEGH positions at the end of the previous quarter. Our calculations also showed that LEGH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Chuck Royce of Royce & Associates[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's go over the latest hedge fund action regarding Legacy Housing Corporation (NASDAQ:LEGH).
Hedge fund activity in Legacy Housing Corporation (NASDAQ:LEGH)
At Q3's end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LEGH over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Chuck Royce's Royce & Associates has the number one position in Legacy Housing Corporation (NASDAQ:LEGH), worth close to $4.7 million, amounting to less than 0.1%% of its total 13F portfolio. On Royce & Associates's heels is Gratia Capital, led by Steve Pei, holding a $0.4 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions comprise Paul Marshall and Ian Wace's Marshall Wace, David M. Knott's Dorset Management and . In terms of the portfolio weights assigned to each position Gratia Capital allocated the biggest weight to Legacy Housing Corporation (NASDAQ:LEGH), around 0.68% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, designating 0.06 percent of its 13F equity portfolio to LEGH.
Now, specific money managers were leading the bulls' herd. Royce & Associates, managed by Chuck Royce, assembled the most outsized position in Legacy Housing Corporation (NASDAQ:LEGH). Royce & Associates had $4.7 million invested in the company at the end of the quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Legacy Housing Corporation (NASDAQ:LEGH) but similarly valued. These stocks are Farmers National Banc Corp (NASDAQ:FMNB), Brightcove Inc (NASDAQ:BCOV), Haverty Furniture Companies, Inc. (NYSE:HVT), and Sohu.com Inc (NASDAQ:SOHU). This group of stocks' market caps match LEGH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FMNB,7,13223,1 BCOV,19,138654,1 HVT,12,63771,3 SOHU,13,77264,4 Average,12.75,73228,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $6 million in LEGH's case. Brightcove Inc (NASDAQ:BCOV) is the most popular stock in this table. On the other hand Farmers National Banc Corp (NASDAQ:FMNB) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Legacy Housing Corporation (NASDAQ:LEGH) is even less popular than FMNB. Hedge funds dodged a bullet by taking a bearish stance towards LEGH. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately LEGH wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); LEGH investors were disappointed as the stock returned -1.1% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.