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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Century Communities, Inc (NYSE:CCS)? The smart money sentiment can provide an answer to this question.
Century Communities, Inc (NYSE:CCS) shareholders have witnessed an increase in support from the world's most elite money managers in recent months. Century Communities, Inc (NYSE:CCS) was in 24 hedge funds' portfolios at the end of March. The all time high for this statistic is 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 18 hedge funds in our database with CCS positions at the end of the fourth quarter. Our calculations also showed that CCS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Matthew Lindenbaum of Basswood Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Keeping this in mind we're going to view the recent hedge fund action regarding Century Communities, Inc (NYSE:CCS).
Do Hedge Funds Think CCS Is A Good Stock To Buy Now?
At first quarter's end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in CCS a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Century Communities, Inc (NYSE:CCS) was held by Basswood Capital, which reported holding $29 million worth of stock at the end of December. It was followed by Atika Capital with a $18 million position. Other investors bullish on the company included Royce & Associates, Marshall Wace LLP, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Atika Capital allocated the biggest weight to Century Communities, Inc (NYSE:CCS), around 1.56% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, designating 1.31 percent of its 13F equity portfolio to CCS.
Consequently, some big names have jumped into Century Communities, Inc (NYSE:CCS) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the largest position in Century Communities, Inc (NYSE:CCS). Marshall Wace LLP had $13 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky's Waratah Capital Advisors also made a $4.6 million investment in the stock during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel's Two Sigma Advisors, Renaissance Technologies, and D. E. Shaw's D E Shaw.
Let's also examine hedge fund activity in other stocks similar to Century Communities, Inc (NYSE:CCS). These stocks are The RealReal, Inc. (NASDAQ:REAL), Chesapeake Utilities Corporation (NYSE:CPK), EHang Holdings Limited (NASDAQ:EH), Liberty Oilfield Services Inc. (NYSE:LBRT), bluebird bio Inc (NASDAQ:BLUE), Talend S.A. (NASDAQ:TLND), and Prelude Therapeutics Incorporated (NASDAQ:PRLD). This group of stocks' market values match CCS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position REAL,24,399233,-8 CPK,6,6692,2 EH,4,7063,2 LBRT,10,41393,2 BLUE,27,226229,-1 TLND,45,1142089,18 PRLD,7,1340901,-1 Average,17.6,451943,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $452 million. That figure was $123 million in CCS's case. Talend S.A. (NASDAQ:TLND) is the most popular stock in this table. On the other hand EHang Holdings Limited (NASDAQ:EH) is the least popular one with only 4 bullish hedge fund positions. Century Communities, Inc (NYSE:CCS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CCS is 64.4. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately CCS wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CCS were disappointed as the stock returned -1.7% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.