KB Home (NYSE:KBH) investors should pay attention to a decrease in hedge fund interest lately.
To most traders, hedge funds are perceived as slow, old investment vehicles of yesteryear. While there are greater than 8000 funds in operation at present, we hone in on the aristocrats of this group, around 450 funds. Most estimates calculate that this group controls the lion’s share of the hedge fund industry’s total asset base, and by watching their best investments, we have formulated a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).
Equally as important, bullish insider trading sentiment is a second way to parse down the stock market universe. Obviously, there are lots of motivations for an insider to cut shares of his or her company, but just one, very clear reason why they would initiate a purchase. Various empirical studies have demonstrated the valuable potential of this method if piggybackers understand what to do (learn more here).
With these “truths” under our belt, we’re going to take a look at the recent action surrounding KB Home (NYSE:KBH).
How are hedge funds trading KB Home (NYSE:KBH)?
At year’s end, a total of 10 of the hedge funds we track were bullish in this stock, a change of -23% from one quarter earlier. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully.
According to our comprehensive database, Odey Asset Management Group, managed by Crispin Odey, holds the largest position in KB Home (NYSE:KBH). Odey Asset Management Group has a $57 million position in the stock, comprising 3.3% of its 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $52 million position; 0% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish include Jim Simons’s Renaissance Technologies, Joe DiMenna’s ZWEIG DIMENNA PARTNERS and Cliff Asness’s AQR Capital Management.
Because KB Home (NYSE:KBH) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of money managers who were dropping their full holdings at the end of the year. At the top of the heap, SAC Subsidiary’s Sigma Capital Management said goodbye to the largest stake of the “upper crust” of funds we key on, worth close to $10 million in stock., and Steven Cohen of SAC Capital Advisors was right behind this move, as the fund cut about $9 million worth. These moves are important to note, as total hedge fund interest dropped by 3 funds at the end of the year.
How have insiders been trading KB Home (NYSE:KBH)?
Insider purchases made by high-level executives is at its handiest when the company in question has seen transactions within the past 180 days. Over the latest six-month time frame, KB Home (NYSE:KBH) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).
Let’s go over 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 match KBH’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Gafisa SA (ADR) (NYSE:GFA) | 5 | 0 | 0 |
| Meritage Homes Corp (NYSE:MTH) | 8 | 0 | 7 |
| The Ryland Group, Inc. (NYSE:RYL) | 15 | 0 | 5 |
| M.D.C. Holdings, Inc. (NYSE:MDC) | 12 | 0 | 4 |
| Standard Pacific Corp. (NYSE:SPF) | 11 | 0 | 0 |
With the results demonstrated by our strategies, retail investors must always pay attention to hedge fund and insider trading activity, and KB Home (NYSE:KBH) shareholders fit into this picture quite nicely.
