Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually, their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Tri Pointe Homes Inc (NYSE:TPH).
Is Tri Pointe Homes Inc (NYSE:TPH) a bargain? The smart money is getting less optimistic. The number of long hedge fund bets dropped by 3 recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Fulton Financial Corp (NASDAQ:FULT), Northern Tier Energy LP (NYSE:NTI), and Zynga Inc (NASDAQ:ZNGA) to gather more data points.
Follow Tri Pointe Homes Inc. (NYSE:TPH)
Follow Tri Pointe Homes Inc. (NYSE:TPH)
To the average investor, there are a lot of metrics shareholders can use to appraise publicly traded companies. A duo of the most underrated metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can trounce the S&P 500 by a solid margin (see the details here).
With all of this in mind, we’re going to take a gander at the latest action regarding Tri Pointe Homes Inc (NYSE:TPH).
What have hedge funds been doing with Tri Pointe Homes Inc (NYSE:TPH)?
Heading into Q4, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 13% from the second quarter. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Clint Carlson’s Carlson Capital has the most valuable position in Tri Pointe Homes Inc (NYSE:TPH), worth close to $100 million, corresponding to 1.2% of its total 13F portfolio. The second largest stake is held by Murray Stahl of Horizon Asset Management, with an $85.6 million position; 1.6% of its 13F portfolio is allocated to the company. Other peers with similar optimism comprise John Osterweis’ Osterweis Capital Management, David Einhorn’s Greenlight Capital and Ken Griffin’s Citadel Investment Group.
Because Tri Pointe Homes Inc (NYSE:TPH) has faced a bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of hedgies that slashed their entire stakes last quarter. Interestingly, Jacob Doft’s Highline Capital Management sold off the largest position of the “upper crust” of funds followed by Insider Monkey, totaling close to $54.4 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $13.4 million worth of shares. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Tri Pointe Homes Inc (NYSE:TPH). These stocks are Fulton Financial Corp (NASDAQ:FULT), Northern Tier Energy LP (NYSE:NTI), Zynga Inc (NASDAQ:ZNGA), and Hancock Holding Company (NASDAQ: HBHC). This group of stocks’ market values is closest to Tri Pointe Homes Inc (NYSE:TPH)’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FULT | 11 | 74152 | -8 |
| NTI | 11 | 54678 | 4 |
| ZNGA | 26 | 495166 | -3 |
| HBHC | 17 | 143375 | 2 |
As you can see, these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $419 million in Tri Pointe Homes Inc (NYSE:TPH)’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand, Fulton Financial Corp (NASDAQ:FULT) is the least popular one with only 11 bullish hedge fund positions. Tri Pointe Homes Inc (NYSE:TPH) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Zynga Inc (NASDAQ:ZNGA) might be a better candidate to consider a long position.
