We can judge whether Beazer Homes USA, Inc. (NYSE:BZH) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Beazer Homes USA, Inc. (NYSE:BZH) was in 9 hedge funds’ portfolios at the end of March. BZH has experienced a decrease in activity from the world’s largest hedge funds recently. There were 13 hedge funds in our database with BZH holdings at the end of the previous quarter. Our calculations also showed that bzh isn’t among the 30 most popular stocks among hedge funds.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Andy Redleaf of Whitebox Advisors
Let’s take a gander at the recent hedge fund action regarding Beazer Homes USA, Inc. (NYSE:BZH).
How are hedge funds trading Beazer Homes USA, Inc. (NYSE:BZH)?
Heading into the second quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the fourth quarter of 2018. By comparison, 14 hedge funds held shares or bullish call options in BZH a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Chuck Royce’s Royce & Associates has the most valuable position in Beazer Homes USA, Inc. (NYSE:BZH), worth close to $13.7 million, amounting to 0.1% of its total 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $4.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Andy Redleaf’s Whitebox Advisors, Jim Simons’s Renaissance Technologies and Alec Litowitz and Ross Laser’s Magnetar Capital.
Judging by the fact that Beazer Homes USA, Inc. (NYSE:BZH) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers who sold off their positions entirely last quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $1.4 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund cut about $0.5 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 4 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Beazer Homes USA, Inc. (NYSE:BZH) but similarly valued. These stocks are MannKind Corporation (NASDAQ:MNKD), Limelight Networks, Inc. (NASDAQ:LLNW), Simulations Plus, Inc. (NASDAQ:SLP), and Carrols Restaurant Group, Inc. (NASDAQ:TAST). This group of stocks’ market valuations are closest to BZH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MNKD | 7 | 16220 | -1 |
| LLNW | 12 | 39931 | -3 |
| SLP | 6 | 20658 | 1 |
| TAST | 19 | 109115 | 2 |
| Average | 11 | 46481 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $28 million in BZH’s case. Carrols Restaurant Group, Inc. (NASDAQ:TAST) is the most popular stock in this table. On the other hand Simulations Plus, Inc. (NASDAQ:SLP) is the least popular one with only 6 bullish hedge fund positions. Beazer Homes USA, Inc. (NYSE:BZH) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately BZH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BZH investors were disappointed as the stock returned -13.6% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
