As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Hovnanian Enterprises, Inc. (NYSE:HOV).
Is Hovnanian Enterprises, Inc. (NYSE:HOV) a buy right now? Hedge funds are getting more optimistic. The number of bullish hedge fund positions advanced by 5 in recent months. Our calculations also showed that HOV 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.
Why do we pay any attention at all to hedge fund sentiment? 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.
[caption id="attachment_256969" align="aligncenter" width="450"] Christian Leone of Luxor Capital Group[/caption]
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. 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 also rely on the best performing hedge funds' buy/sell signals. We're going to take a glance at the latest hedge fund action regarding Hovnanian Enterprises, Inc. (NYSE:HOV).
Hedge fund activity in Hovnanian Enterprises, Inc. (NYSE:HOV)
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 167% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HOV over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Hovnanian Enterprises, Inc. (NYSE:HOV), with a stake worth $2.5 million reported as of the end of September. Trailing Renaissance Technologies was Waterfront Capital Partners, which amassed a stake valued at $2.4 million. D E Shaw, Angelo Gordon & Co, and Luxor Capital Group 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 Lucas Capital Management allocated the biggest weight to Hovnanian Enterprises, Inc. (NYSE:HOV), around 0.39% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, designating 0.37 percent of its 13F equity portfolio to HOV.
Now, some big names have jumped into Hovnanian Enterprises, Inc. (NYSE:HOV) headfirst. Waterfront Capital Partners, managed by Eduardo Abush, established the most valuable position in Hovnanian Enterprises, Inc. (NYSE:HOV). Waterfront Capital Partners had $2.4 million invested in the company at the end of the quarter. David E. Shaw's D E Shaw also initiated a $1.2 million position during the quarter. The following funds were also among the new HOV investors: Russell Lucas's Lucas Capital Management and Michael Gelband's ExodusPoint Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Hovnanian Enterprises, Inc. (NYSE:HOV) but similarly valued. We will take a look at VOXX International Corporation (NASDAQ:VOXX), Airgain, Inc. (NASDAQ:AIRG), ATIF Holdings Limited (NASDAQ:ATIF), and Medley Management Inc (NYSE:MDLY). All of these stocks' market caps match HOV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VOXX,8,28594,-1 AIRG,12,6745,6 ATIF,1,69,0 MDLY,3,2974,-2 Average,6,9596,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $9 million in HOV's case. Airgain, Inc. (NASDAQ:AIRG) is the most popular stock in this table. On the other hand ATIF Holdings Limited (NASDAQ:ATIF) is the least popular one with only 1 bullish hedge fund positions. Hovnanian Enterprises, Inc. (NYSE:HOV) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on HOV as the stock returned 15.8% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.