Hedge Funds Are Betting On Beazer Homes USA, Inc. (BZH)

The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Beazer Homes USA, Inc. (NYSE:BZH) from the perspective of those successful funds.

Beazer Homes USA, Inc. (NYSE:BZH) was in 15 hedge funds’ portfolios at the end of the third quarter of 2016. BZH investors should pay attention to an increase in support from the world’s most successful money managers recently. There were 11 hedge funds in our database with BZH positions at the end of the previous quarter. At the end of this article we will also compare BZH to other stocks including Jones Energy Inc (NYSE:JONE), Territorial Bancorp Inc (NASDAQ:TBNK), and Trecora Resources (NYSE:TREC) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, we’re going to view the recent action encompassing Beazer Homes USA, Inc. (NYSE:BZH).

Hedge fund activity in Beazer Homes USA, Inc. (NYSE:BZH)

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 36% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards BZH over the last 5 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Royce & Associates, led by Chuck Royce, holds the largest position in Beazer Homes USA, Inc. (NYSE:BZH). According to regulatory filings, the fund has a $15.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by GMT Capital, led by Thomas E. Claugus, which oversees a $13.5 million position; 0.3% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish consist of David Warren’s DW Partners, David Keidan’s Buckingham Capital Management and Cliff Asness’s AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

With a general bullishness amongst the heavyweights, key money managers have jumped into Beazer Homes USA, Inc. (NYSE:BZH) headfirst. Balyasny Asset Management, led by Dmitry Balyasny, created the largest position in Beazer Homes USA, Inc. (NYSE:BZH). According to its latest 13F filing, the fund had $1.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Matthew Hulsizer’s PEAK6 Capital Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Beazer Homes USA, Inc. (NYSE:BZH) but similarly valued. We will take a look at Jones Energy Inc (NYSE:JONE), Territorial Bancorp Inc (NASDAQ:TBNK), Trecora Resources (NYSE:TREC), and Tucows Inc. (USA) (NYSEAMEX:TCX). This group of stocks’ market valuations are closest to BZH’s market valuation.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $87 million in BZH’s case. Jones Energy Inc (NYSE:JONE) is the most popular stock in this table. On the other hand Territorial Bancorp Inc (NASDAQ:TBNK) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Beazer Homes USA, Inc. (NYSE:BZH) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: none.