Is Tri Pointe Group Inc (NYSE:TPH) a good equity to bet on 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.
Tri Pointe Group Inc (NYSE:TPH) was in 24 hedge funds’ portfolios at the end of September. TPH investors should pay attention to an increase in hedge fund sentiment of late. There were 17 hedge funds in our database with TPH positions at the end of the previous quarter. Our calculations also showed that TPH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). At the end of this article we will compare TPH against its similarly valued peers such as LegacyTexas Financial Group Inc (NASDAQ:LTXB), Pretium Resources Inc (NYSE:PVG), First Merchants Corporation (NASDAQ:FRME), and Myriad Genetics, Inc. (NASDAQ:MYGN).
Video: Click the image to 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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the fresh hedge fund action surrounding Tri Pointe Group Inc (NYSE:TPH).
What have hedge funds been doing with Tri Pointe Group Inc (NYSE:TPH)?
At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 41% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards TPH over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Greg Poole’s Echo Street Capital Management has the number one position in Tri Pointe Group Inc (NYSE:TPH), worth close to $46.9 million, corresponding to 0.8% of its total 13F portfolio. Sitting at the No. 2 spot is Greenhaven Associates, led by Edgar Wachenheim, holding a $33.4 million position; 0.7% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish comprise Israel Englander’s Millennium Management, Dmitry Balyasny’s Balyasny Asset Management and Ken Fisher’s Fisher Asset Management. In terms of the portfolio weights assigned to each position Third Avenue Management allocated the biggest weight to Tri Pointe Group Inc (NYSE:TPH), around 0.82% of its portfolio. Echo Street Capital Management is also relatively very bullish on the stock, setting aside 0.79 percent of its 13F equity portfolio to TPH.
As industrywide interest jumped, some big names have jumped into Tri Pointe Group Inc (NYSE:TPH) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, assembled the biggest position in Tri Pointe Group Inc (NYSE:TPH). PEAK6 Capital Management had $2.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $1.5 million position during the quarter. The other funds with brand new TPH positions are Bruce Kovner’s Caxton Associates, Ray Dalio’s Bridgewater Associates, and David Harding’s Winton Capital Management.
Let’s now review hedge fund activity in other stocks similar to Tri Pointe Group Inc (NYSE:TPH). These stocks are LegacyTexas Financial Group Inc (NASDAQ:LTXB), Pretium Resources Inc (NYSE:PVG), First Merchants Corporation (NASDAQ:FRME), and Myriad Genetics, Inc. (NASDAQ:MYGN). This group of stocks’ market values are closest to TPH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LTXB | 10 | 92773 | -5 |
| PVG | 22 | 121252 | 0 |
| FRME | 10 | 91788 | 0 |
| MYGN | 13 | 240082 | -2 |
| Average | 13.75 | 136474 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $230 million in TPH’s case. Pretium Resources Inc (NYSE:PVG) is the most popular stock in this table. On the other hand LegacyTexas Financial Group Inc (NASDAQ:LTXB) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Tri Pointe Group Inc (NYSE:TPH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TPH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TPH were disappointed as the stock returned 3.6% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
