We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Lennar Corporation (NYSE:LEN) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. LEN was in 57 hedge funds’ portfolios at the end of September. There were 53 hedge funds in our database with LEN positions at the end of the previous quarter. Our calculations also showed that LEN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ricky Sandler of Eminence 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 take a gander at the latest hedge fund action encompassing Lennar Corporation (NYSE:LEN).
How are hedge funds trading Lennar Corporation (NYSE:LEN)?
Heading into the fourth quarter of 2019, a total of 57 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards LEN over the last 17 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Greenhaven Associates, managed by Edgar Wachenheim, holds the biggest position in Lennar Corporation (NYSE:LEN). Greenhaven Associates has a $521.9 million position in the stock, comprising 10.6% of its 13F portfolio. Coming in second is Eminence Capital, managed by Ricky Sandler, which holds a $206.6 million position; the fund has 2.5% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish comprise John Khoury’s Long Pond Capital, Glenn Greenberg’s Brave Warrior Capital and Gavin M. Abrams’s Abrams Bison Investments. In terms of the portfolio weights assigned to each position Abrams Bison Investments allocated the biggest weight to Lennar Corporation (NYSE:LEN), around 10.78% of its portfolio. Greenhaven Associates is also relatively very bullish on the stock, setting aside 10.55 percent of its 13F equity portfolio to LEN.
As aggregate interest increased, specific money managers have jumped into Lennar Corporation (NYSE:LEN) headfirst. Owl Creek Asset Management, managed by Jeffrey Altman, created the largest position in Lennar Corporation (NYSE:LEN). Owl Creek Asset Management had $32.2 million invested in the company at the end of the quarter. Aaron Cowen’s Suvretta Capital Management also made a $24.5 million investment in the stock during the quarter. The other funds with brand new LEN positions are William Harnisch’s Peconic Partners, Zach Schreiber’s Point State Capital, and Curtis Schenker and Craig Effron’s Scoggin.
Let’s also examine hedge fund activity in other stocks similar to Lennar Corporation (NYSE:LEN). These stocks are KeyCorp (NYSE:KEY), Centene Corporation (NYSE:CNC), Splunk Inc (NASDAQ:SPLK), and CDW Corporation (NASDAQ:CDW). This group of stocks’ market values match LEN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KEY | 28 | 671066 | -3 |
| CNC | 55 | 2034586 | -10 |
| SPLK | 32 | 168599 | 7 |
| CDW | 26 | 1168154 | -3 |
| Average | 35.25 | 1010601 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.25 hedge funds with bullish positions and the average amount invested in these stocks was $1011 million. That figure was $1989 million in LEN’s case. Centene Corporation (NYSE:CNC) is the most popular stock in this table. On the other hand CDW Corporation (NASDAQ:CDW) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Lennar Corporation (NYSE:LEN) 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. Hedge funds were also right about betting on LEN, though not to the same extent, as the stock returned 6.9% during the fourth quarter (through the end of November) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
