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Was The Smart Money Right About Piling Into NVR, Inc. (NVR)?

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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about NVR, Inc. (NYSE:NVR) in this article.

Is NVR, Inc. (NYSE:NVR) a buy here? The best stock pickers were becoming more confident. The number of long hedge fund positions went up by 4 lately. NVR, Inc. (NYSE:NVR) was in 46 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 42. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NVR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 42 hedge funds in our database with NVR holdings at the end of September.

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 monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Armitage Egerton Capital
John Armitage Egerton Capital

John Armitage of Egerton Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to take a look at the key hedge fund action encompassing NVR, Inc. (NYSE:NVR).

Do Hedge Funds Think NVR Is A Good Stock To Buy Now?

At Q4's end, a total of 46 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 NVR over the last 22 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Is NVR A Good Stock To Buy?
Is NVR A Good Stock To Buy?

More specifically, Diamond Hill Capital was the largest shareholder of NVR, Inc. (NYSE:NVR), with a stake worth $435.7 million reported as of the end of December. Trailing Diamond Hill Capital was Egerton Capital Limited, which amassed a stake valued at $229.6 million. Impala Asset Management, Millennium Management, and Citadel Investment 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 Impala Asset Management allocated the biggest weight to NVR, Inc. (NYSE:NVR), around 7.54% of its 13F portfolio. Manor Road Capital Partners is also relatively very bullish on the stock, setting aside 7.29 percent of its 13F equity portfolio to NVR.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into NVR, Inc. (NYSE:NVR) headfirst. Anomaly Capital Management, managed by Ben Jacobs, assembled the most outsized position in NVR, Inc. (NYSE:NVR). Anomaly Capital Management had $22.2 million invested in the company at the end of the quarter. Constantine Mamakos's Venator Management LLC also made a $7.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Louis Bacon's Moore Global Investments, Stephen Mykijewycz's Masterton Capital Management, and The Motley Fool's 1623 Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as NVR, Inc. (NYSE:NVR) but similarly valued. These stocks are Cheniere Energy, Inc. (NYSE:LNG), Domino's Pizza, Inc. (NYSE:DPZ), Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), Suzano S.A. (NYSE:SUZ), IDEX Corporation (NYSE:IEX), Extra Space Storage, Inc. (NYSE:EXR), and Leidos Holdings Inc (NYSE:LDOS). All of these stocks' market caps are similar to NVR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LNG,38,2279913,-2 DPZ,37,1222281,2 ALNY,39,756924,4 SUZ,6,48722,2 IEX,29,738242,3 EXR,29,298792,2 LDOS,14,92699,-11 Average,27.4,776796,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.4 hedge funds with bullish positions and the average amount invested in these stocks was $777 million. That figure was $1430 million in NVR's case. Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) is the most popular stock in this table. On the other hand Suzano S.A. (NYSE:SUZ) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks NVR, Inc. (NYSE:NVR) is more popular among hedge funds. Our overall hedge fund sentiment score for NVR is 89. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on NVR as the stock returned 23% since the end of December (through 4/30) 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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