How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Hovnanian Enterprises, Inc. (NYSE:HOV).
Hovnanian Enterprises, Inc. (NYSE:HOV) was in 16 hedge funds’ portfolios at the end of September. HOV has seen an increase in enthusiasm from smart money lately. There were 11 hedge funds in our database with HOV positions at the end of the previous quarter. At the end of this article we will also compare HOV to other stocks, including Cytokinetics, Inc. (NASDAQ:CYTK), PowerSecure International, Inc. (NASDAQ:POWR), and Cohu, Inc. (NASDAQ:COHU) to get a better sense of its popularity.
Follow Hovnanian Enterprises Inc (NYSE:HOV)
Follow Hovnanian Enterprises Inc (NYSE:HOV)
In today’s marketplace there are a lot of methods stock traders have at their disposal to appraise their stock investments. A duo of the best methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite money managers can trounce the S&P 500 by a significant margin (see the details here).
With all of this in mind, let’s take a peek at the fresh action regarding Hovnanian Enterprises, Inc. (NYSE:HOV).
How have hedgies been trading Hovnanian Enterprises, Inc. (NYSE:HOV)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 45% from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Marc Lasry’s Avenue Capital has the number one position in Hovnanian Enterprises, Inc. (NYSE:HOV), worth close to $11.3 million, corresponding to 1.8% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions comprise John Thiessen’s Vertex One Asset Management, Michael Barnes and Arif Inayatullah’s Tricadia Capital Management and Michael Hintze’s CQS Cayman LP.
As industrywide interest jumped, some big names were leading the bulls’ herd. Tricadia Capital Management assembled the largest position in Hovnanian Enterprises, Inc. (NYSE:HOV). Tricadia Capital Management had $4.7 million invested in the company at the end of the quarter. David Keidan’s Buckingham Capital Management also made a $1.5 million investment in the stock during the quarter. The other funds with brand new HOV positions are Sharif Siddiqui’s Alpenglow Capital, Steve Pei’s Gratia Capital, and Israel Englander’s Millennium Management.
Let’s also examine hedge fund activity in other stocks similar to Hovnanian Enterprises, Inc. (NYSE:HOV). These stocks are Cytokinetics, Inc. (NASDAQ:CYTK), PowerSecure International, Inc. (NASDAQ:POWR), Cohu, Inc. (NASDAQ:COHU), and Fifth Street Senior Floating Rate Corp (NASDAQ:FSFR). This group of stocks’ market valuations resemble HOV’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CYTK | 17 | 47150 | 4 |
| POWR | 10 | 12468 | -4 |
| COHU | 14 | 18149 | 1 |
| FSFR | 4 | 9001 | 0 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $22 million, compared to $38 million in HOV’s case. Cytokinetics, Inc. (NASDAQ:CYTK) is the most popular stock in this table, while Fifth Street Senior Floating Rate Corp (NASDAQ:FSFR) is the least popular one with only 4 bullish hedge fund positions. Hovnanian Enterprises, Inc. (NYSE:HOV) 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 CYTK might be a better candidate to consider a long position.
