A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on PulteGroup, Inc. (NYSE:PHM).
PulteGroup, Inc. (NYSE:PHM) investors should pay attention to a decrease in activity from the world's largest hedge funds of late. PHM was in 28 hedge funds' portfolios at the end of the third quarter of 2019. There were 31 hedge funds in our database with PHM holdings at the end of the previous quarter. Our calculations also showed that PHM 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_88925" align="aligncenter" width="450"] Bill Miller of Miller Value Partners[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a gander at the key hedge fund action surrounding PulteGroup, Inc. (NYSE:PHM).
How are hedge funds trading PulteGroup, Inc. (NYSE:PHM)?
Heading into the fourth quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PHM over the last 17 quarters. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of PulteGroup, Inc. (NYSE:PHM), with a stake worth $329.7 million reported as of the end of September. Trailing AQR Capital Management was Greenhaven Associates, which amassed a stake valued at $133.9 million. GLG Partners, Samlyn Capital, and Miller Value Partners 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 Greenhaven Associates allocated the biggest weight to PulteGroup, Inc. (NYSE:PHM), around 2.71% of its portfolio. Miller Value Partners is also relatively very bullish on the stock, dishing out 2.14 percent of its 13F equity portfolio to PHM.
Due to the fact that PulteGroup, Inc. (NYSE:PHM) has experienced a decline in interest from the smart money, we can see that there were a few money managers that slashed their entire stakes heading into Q4. Interestingly, Bruce Kovner's Caxton Associates dumped the largest investment of the 750 funds monitored by Insider Monkey, worth an estimated $7.8 million in stock. Ken Heebner's fund, Capital Growth Management, also said goodbye to its stock, about $2.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as PulteGroup, Inc. (NYSE:PHM) but similarly valued. We will take a look at NRG Energy Inc (NYSE:NRG), EPAM Systems Inc (NYSE:EPAM), Carvana Co. (NYSE:CVNA), and Booz Allen Hamilton Holding Corporation (NYSE:BAH). This group of stocks' market valuations match PHM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NRG,46,1482443,4 EPAM,24,286367,1 CVNA,48,2000888,3 BAH,33,469671,2 Average,37.75,1059842,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.75 hedge funds with bullish positions and the average amount invested in these stocks was $1060 million. That figure was $826 million in PHM's case. Carvana Co. (NYSE:CVNA) is the most popular stock in this table. On the other hand EPAM Systems Inc (NYSE:EPAM) is the least popular one with only 24 bullish hedge fund positions. PulteGroup, Inc. (NYSE:PHM) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on PHM, though not to the same extent, as the stock returned 8.5% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.