Do Hedge Funds Love KB Home (KBH)?

At Insider Monkey, we pore over the filings of nearly 867 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30th. In this article, we will use that wealth of knowledge to determine whether or not KB Home (NYSE:KBH) makes for a good investment right now.

Is KB Home (NYSE:KBH) a buy, sell, or hold? The best stock pickers were getting less bullish. The number of bullish hedge fund bets shrunk by 1 recently. KB Home (NYSE:KBH) was in 26 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 29. Our calculations also showed that KBH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 27 hedge funds in our database with KBH holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind we’re going to review the key hedge fund action encompassing KB Home (NYSE:KBH).

Matthew Lindenbaum of Basswood Capital

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

At the end of September, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. On the other hand, there were a total of 23 hedge funds with a bullish position in KBH a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the largest position in KB Home (NYSE:KBH). Fisher Asset Management has a $95.8 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Balyasny Asset Management, managed by Dmitry Balyasny, which holds a $66.8 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions contain Matthew Lindenbaum’s Basswood Capital, Noam Gottesman’s GLG Partners and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Basswood Capital allocated the biggest weight to KB Home (NYSE:KBH), around 1.04% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, designating 0.88 percent of its 13F equity portfolio to KBH.

Since KB Home (NYSE:KBH) has witnessed falling interest from the smart money, we can see that there exists a select few hedge funds who were dropping their entire stakes in the third quarter. Intriguingly, Matthew Crandall Gilman’s Hill Winds Capital cut the largest stake of the “upper crust” of funds watched by Insider Monkey, totaling close to $1.6 million in stock, and Jinghua Yan’s TwinBeech Capital was right behind this move, as the fund sold off about $1.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to KB Home (NYSE:KBH). These stocks are Canada Goose Holdings Inc. (NYSE:GOOS), Sensient Technologies Corporation (NYSE:SXT), E2open Parent Holdings, Inc. (NYSE:ETWO), Physicians Realty Trust (NYSE:DOC), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), Yamana Gold Inc. (NYSE:AUY), and Atlantica Sustainable Infrastructure plc (NASDAQ:AY). This group of stocks’ market values are closest to KBH’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $376 million. That figure was $299 million in KBH’s case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand Atlantica Sustainable Infrastructure plc (NASDAQ:AY) is the least popular one with only 10 bullish hedge fund positions. KB Home (NYSE:KBH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KBH is 62.9. 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 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 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Hedge funds were also right about betting on KBH as the stock returned 13.2% since the end of Q3 (through 12/9) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.