In the eyes of most stock holders, hedge funds are perceived as underperforming, old investment vehicles of the past. While there are greater than 8000 funds trading at present, we at Insider Monkey hone in on the moguls of this club, around 450 funds. It is widely believed that this group has its hands on most of the hedge fund industry’s total capital, and by monitoring their top equity investments, we have identified a number of investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (see the details here).
Just as beneficial, bullish insider trading sentiment is a second way to parse down the stock market universe. Just as you’d expect, there are plenty of reasons for a corporate insider to get rid of shares of his or her company, but only one, very clear reason why they would behave bullishly. Various academic studies have demonstrated the market-beating potential of this strategy if you understand what to do (learn more here).
With these “truths” under our belt, it’s important to take a glance at the recent action regarding KB Home (NYSE:KBH).
What does the smart money think about KB Home (NYSE:KBH)?
Heading into Q2, a total of 17 of the hedge funds we track were long in this stock, a change of 42% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully.
When looking at the hedgies we track, Crispin Odey’s Odey Asset Management Group had the largest position in KB Home (NYSE:KBH), worth close to $77.3 million, comprising 2.7% of its total 13F portfolio. Coming in second is Jim Simons of Renaissance Technologies, with a $25.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedgies that are bullish include Joe DiMenna’s ZWEIG DIMENNA PARTNERS, Ken Griffin’s Citadel Investment Group and Richard Driehaus’s Driehaus Capital.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Driehaus Capital, managed by Richard Driehaus, established the most valuable position in KB Home (NYSE:KBH). Driehaus Capital had 9.9 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also initiated a $9.4 million position during the quarter. The other funds with brand new KBH positions are Brian Taylor’s Pine River Capital Management, Israel Englander’s Millennium Management, and Dmitry Balyasny’s Balyasny Asset Management.
What have insiders been doing with KB Home (NYSE:KBH)?
Insider buying is particularly usable when the company in focus has experienced transactions within the past 180 days. Over the latest six-month time period, KB Home (NYSE:KBH) has experienced zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to KB Home (NYSE:KBH). These stocks are Gafisa SA (ADR) (NYSE:GFA), Meritage Homes Corp (NYSE:MTH), The Ryland Group, Inc. (NYSE:RYL), M.D.C. Holdings, Inc. (NYSE:MDC), and Standard Pacific Corp. (NYSE:SPF). All of these stocks are in the residential construction industry and their market caps are closest to KBH’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Gafisa SA (ADR) (NYSE:GFA) | 7 | 0 | 0 |
| Meritage Homes Corp (NYSE:MTH) | 20 | 0 | 8 |
| The Ryland Group, Inc. (NYSE:RYL) | 16 | 0 | 0 |
| M.D.C. Holdings, Inc. (NYSE:MDC) | 14 | 0 | 4 |
| Standard Pacific Corp. (NYSE:SPF) | 19 | 0 | 3 |
With the results shown by our time-tested strategies, everyday investors should always monitor hedge fund and insider trading sentiment, and KB Home (NYSE:KBH) is no exception.
