At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Tri Pointe Group Inc (NYSE:TPH).
Is Tri Pointe Group Inc (NYSE:TPH) a healthy stock for your portfolio? Hedge funds are in a pessimistic mood. The number of long hedge fund positions dropped by 5 recently. Our calculations also showed that TPH isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). TPH was in 27 hedge funds' portfolios at the end of March. There were 32 hedge funds in our database with TPH holdings at the end of the previous quarter. Video: 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to go over the key hedge fund action encompassing Tri Pointe Group Inc (NYSE:TPH).
How are hedge funds trading Tri Pointe Group Inc (NYSE:TPH)?
At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TPH over the last 18 quarters. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Echo Street Capital Management, managed by Greg Poole, holds the biggest position in Tri Pointe Group Inc (NYSE:TPH). Echo Street Capital Management has a $39.7 million position in the stock, comprising 0.9% of its 13F portfolio. The second most bullish fund manager is Cliff Asness of AQR Capital Management, with a $23.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism comprise Ken Heebner's Capital Growth Management, D. E. Shaw's D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position Capital Growth Management allocated the biggest weight to Tri Pointe Group Inc (NYSE:TPH), around 2.43% of its 13F portfolio. Echo Street Capital Management is also relatively very bullish on the stock, earmarking 0.85 percent of its 13F equity portfolio to TPH.
Since Tri Pointe Group Inc (NYSE:TPH) has experienced bearish sentiment from the smart money, it's easy to see that there was a specific group of money managers who were dropping their entire stakes by the end of the first quarter. It's worth mentioning that David S. Winter and David J. Millstone's 40 North Management cut the biggest stake of all the hedgies followed by Insider Monkey, totaling about $45.6 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund said goodbye to about $32.9 million worth. These moves are important to note, as aggregate hedge fund interest fell by 5 funds by the end of the first quarter.
Let's go over hedge fund activity in other stocks similar to Tri Pointe Group Inc (NYSE:TPH). These stocks are Masonite International Corp (NYSE:DOOR), Grupo Simec S.A.B. de C.V. (NYSE:SIM), Yext, Inc. (NYSE:YEXT), and Monmouth Real Estate Investment Corp. (NYSE:MNR). This group of stocks' market values are similar to TPH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DOOR,26,271479,5 SIM,1,1807,0 YEXT,9,18486,-4 MNR,12,61577,-2 Average,12,88337,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $142 million in TPH's case. Masonite International Corp (NYSE:DOOR) is the most popular stock in this table. On the other hand Grupo Simec S.A.B. de C.V. (NYSE:SIM) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Tri Pointe Group Inc (NYSE:TPH) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on TPH as the stock returned 63.3% so far in Q2 (through the end of May) 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.
Disclosure: None. This article was originally published at Insider Monkey.