Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of PulteGroup, Inc. (NYSE:PHM) based on that data.
Is PulteGroup, Inc. (NYSE:PHM) going to take off soon? Money managers were turning less bullish. The number of bullish hedge fund positions fell by 8 in recent months. PulteGroup, Inc. (NYSE:PHM) was in 34 hedge funds’ portfolios at the end of June. The all time high for this statistic is 43. Our calculations also showed that PHM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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. Keeping this in mind let’s analyze the latest hedge fund action surrounding PulteGroup, Inc. (NYSE:PHM).
Do Hedge Funds Think PHM Is A Good Stock To Buy Now?
At Q2’s end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PHM over the last 24 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in PulteGroup, Inc. (NYSE:PHM), which was worth $178.8 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $160.2 million worth of shares. D E Shaw, Appaloosa Management LP, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Prana Capital Management allocated the biggest weight to PulteGroup, Inc. (NYSE:PHM), around 3.89% of its 13F portfolio. Appaloosa Management LP is also relatively very bullish on the stock, designating 1.7 percent of its 13F equity portfolio to PHM.
Because PulteGroup, Inc. (NYSE:PHM) has faced falling interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedgies who sold off their entire stakes last quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management cut the largest investment of the “upper crust” of funds tracked by Insider Monkey, worth about $85.9 million in stock, and Edgar Wachenheim’s Greenhaven Associates was right behind this move, as the fund sold off about $52.9 million worth. These transactions are interesting, as total hedge fund interest fell by 8 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to PulteGroup, Inc. (NYSE:PHM). We will take a look at Telefonica Brasil SA (NYSE:VIV), Ceridian HCM Holding Inc. (NYSE:CDAY), Leidos Holdings Inc (NYSE:LDOS), RH (NYSE:RH), CenterPoint Energy, Inc. (NYSE:CNP), Signature Bank (NASDAQ:SBNY), and WestRock Company (NYSE:WRK). This group of stocks’ market caps match PHM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VIV | 9 | 59331 | 0 |
| CDAY | 25 | 1476874 | -3 |
| LDOS | 22 | 170773 | 4 |
| RH | 54 | 4331314 | 4 |
| CNP | 20 | 287723 | -5 |
| SBNY | 43 | 787102 | 3 |
| WRK | 32 | 572106 | 5 |
| Average | 29.3 | 1097889 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $1098 million. That figure was $949 million in PHM’s case. RH (NYSE:RH) is the most popular stock in this table. On the other hand Telefonica Brasil SA (NYSE:VIV) is the least popular one with only 9 bullish hedge fund positions. PulteGroup, Inc. (NYSE:PHM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PHM is 48.5. 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 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately PHM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PHM were disappointed as the stock returned -13.2% since the end of June (through 10/11) 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.
