In this article we will check out the progression of hedge fund sentiment towards Century Communities, Inc (NYSE:CCS) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Century Communities, Inc (NYSE:CCS) undervalued? Prominent investors are taking a bearish view. The number of bullish hedge fund positions fell by 6 recently. Our calculations also showed that CCS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). CCS was in 17 hedge funds’ portfolios at the end of March. There were 23 hedge funds in our database with CCS holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Brad Farber of Atika Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a peek at the fresh hedge fund action encompassing Century Communities, Inc (NYSE:CCS).
How are hedge funds trading Century Communities, Inc (NYSE:CCS)?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in CCS a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Howard Marks’s Oaktree Capital Management has the largest position in Century Communities, Inc (NYSE:CCS), worth close to $26.4 million, amounting to 0.7% of its total 13F portfolio. The second most bullish fund manager is Basswood Capital, led by Matthew Lindenbaum, holding a $11.6 million position; 1.4% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism contain Dmitry Balyasny’s Balyasny Asset Management, Brad Farber’s Atika Capital and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Lyon Street Capital allocated the biggest weight to Century Communities, Inc (NYSE:CCS), around 2.28% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, designating 1.36 percent of its 13F equity portfolio to CCS.
Seeing as Century Communities, Inc (NYSE:CCS) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of money managers that elected to cut their positions entirely by the end of the first quarter. Intriguingly, Israel Englander’s Millennium Management dumped the largest position of the “upper crust” of funds watched by Insider Monkey, worth about $5.1 million in stock. Ric Dillon’s fund, Diamond Hill Capital, also sold off its stock, about $4.6 million worth. These moves are important to note, as total hedge fund interest dropped by 6 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks similar to Century Communities, Inc (NYSE:CCS). These stocks are Innate Pharma S.A. (NASDAQ:IPHA), Canaan Inc. (NASDAQ:CAN), Genesis Energy, L.P. (NYSE:GEL), and B. Riley Financial, Inc. (NASDAQ:RILY). This group of stocks’ market caps are similar to CCS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IPHA | 4 | 39880 | 0 |
| CAN | 3 | 740 | 1 |
| GEL | 4 | 7087 | 3 |
| RILY | 14 | 71858 | -2 |
| Average | 6.25 | 29891 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $56 million in CCS’s case. B. Riley Financial, Inc. (NASDAQ:RILY) is the most popular stock in this table. On the other hand Canaan Inc. (NASDAQ:CAN) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Century Communities, Inc (NYSE:CCS) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on CCS as the stock returned 110.3% so far in Q2 (through June 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
