In this article you are going to find out whether hedge funds think KB Home (NYSE:KBH) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
KB Home (NYSE:KBH) shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. KB Home (NYSE:KBH) was in 27 hedge funds’ portfolios at the end of June. The all time high for this statistic is 29. There were 24 hedge funds in our database with KBH holdings at the end of March. Our calculations also showed that KBH isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Lindenbaum of Basswood Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to go over the key hedge fund action regarding KB Home (NYSE:KBH).
Do Hedge Funds Think KBH Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KBH over the last 24 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in KB Home (NYSE:KBH) was held by Fisher Asset Management, which reported holding $101.5 million worth of stock at the end of June. It was followed by Millennium Management with a $60 million position. Other investors bullish on the company included GLG Partners, Balyasny Asset Management, and Basswood Capital. In terms of the portfolio weights assigned to each position Basswood Capital allocated the biggest weight to KB Home (NYSE:KBH), around 0.89% of its 13F portfolio. Hill Winds Capital is also relatively very bullish on the stock, designating 0.86 percent of its 13F equity portfolio to KBH.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Engineers Gate Manager, managed by Greg Eisner, created the most outsized position in KB Home (NYSE:KBH). Engineers Gate Manager had $1.8 million invested in the company at the end of the quarter. Matthew Crandall Gilman’s Hill Winds Capital also made a $1.6 million investment in the stock during the quarter. The other funds with brand new KBH positions are Jinghua Yan’s TwinBeech Capital, Qing Li’s Sciencast Management, and Mika Toikka’s AlphaCrest Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as KB Home (NYSE:KBH) but similarly valued. We will take a look at Ryder System, Inc. (NYSE:R), Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), The Hain Celestial Group, Inc. (NASDAQ:HAIN), CONMED Corporation (NASDAQ:CNMD), American National Group Inc. (NASDAQ:ANAT), Avnet, Inc. (NYSE:AVT), and Sabre Corporation (NASDAQ:SABR). This group of stocks’ market caps are closest to KBH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| R | 18 | 271045 | -2 |
| PPBI | 12 | 138610 | 2 |
| HAIN | 26 | 931745 | 3 |
| CNMD | 21 | 174707 | -2 |
| ANAT | 20 | 113272 | 9 |
| AVT | 28 | 817188 | 1 |
| SABR | 37 | 972156 | -3 |
| Average | 23.1 | 488389 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $488 million. That figure was $288 million in KBH’s case. Sabre Corporation (NASDAQ:SABR) is the most popular stock in this table. On the other hand Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) is the least popular one with only 12 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 65.9. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately KBH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on KBH were disappointed as the stock returned -1.7% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
