5 Homebuilders That Hedge Funds Love Amid Booming New-Home Sales

#3. Toll Brothers Inc (NYSE:TOL)

– Number of Hedge Funds With Long Positions (as of June 30): 28

– Aggregate Value of Hedge Funds’ Holdings (as of June 30): $315 million

Despite a 17.6% reduction in hedge fund backing over the second quarter, Toll Brothers Inc (NYSE:TOL) made it to the homebuilders’ podium, with 28 funds among those we track holding more than 7% of its stock in aggregate. Included in this group were Jim Simons’ Renaissance Technologies, which boosted its holding by 23% between April and June, to 651,400 shares, and Ray Dalio’s Bridgewater Associates, with 604,652 shares worth $16.2 million as of June 30.

Although shares of Toll Brothers Inc (NYSE:TOL) are down by more than 6.15% year-to-date, they have been on the rise for a while now, having recuperated 17.5% of their value since the end of the second quarter. Shares spiked by 8.8% on Tuesday after the company reported third quarter EPS of $0.61, in-line with the Street’s consensus, on revenue of $1.27 billion, $20 million ahead of expectations. However, it was not only the revenue beat, or the 23% year-over-year growth in sales that pushed the stock up, but the aforementioned new home sales report which was issued on the same day, sending several homebuilders stocks upwards.

#2. D.R. Horton, Inc. (NYSE:DHI)

– Number of Hedge Funds With Long Positions (as of June 30): 31

– Aggregate Value of Hedge Funds’ Holdings (as of June 30): $1.01 billion

D.R. Horton, Inc. (NYSE:DHI) is our runner up, with 31 funds in our database long its stock on June 30, though down from 38 on March 31. Noteworthy was the position held by Ken Heebner’s Capital Growth Management, which comprised 7.55 million shares. Another notable investor was Greenhaven Associates, which, on top of holding 6.66 million shares of the company, held stakes in PulteGroup, Toll Brothers, Lennar, and other homebuilding-related stocks like Lowe’s Companies, Inc. (NYSE:LOW).

Shares of D.R. Horton, Inc. (NYSE:DHI) have been steadily on the rise since their February lows, having gained more than 40% since then, and about 5.3% since the beginning of the third quarter. Earlier this week, The Street’s Bruce Kamich made the case that the stock has hit a ceiling, after the strong run from its late-2008 lows. Shares were down almost 1% on that day.

#1. Lennar Corporation (NYSE:LEN)

– Number of Hedge Funds With Long Positions (as of June 30): 40

– Aggregate Value of Hedge Funds’ Holdings (as of June 30): $1.19 billion

Finally, there’s Lennar Corporation (NYSE:LEN), which was owned by 40 hedge funds holding more than 12% of its float as of June 30. Among the large shareholders of the company’s Class A stock were John Khoury’s Long Pond Capital, with 2.09 million shares, and Ross Margolies’ Stelliam Investment Management, with 1.6 million shares.

The Street’s Bruce Kamich also argued that Lennar Corporation (NYSE:LEN) wouldn’t go much higher due to what he defines as a lack of “upside leadership.” For those long Lennar, he would recommend using a sell stop below $44 to exit any long stakes. On the other hand, analysts at Zacks argued that after having delivered strong results last year and a robust first-half of 2016, and amid a sturdy housing and macro backdrop, that “Lennar is poised for continued strong performance in the second half.” So far, shares of Lennar are up by 3% in the second-half of this year.

Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned in this article.