It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 18.7% so far in 2019 and outperformed the S&P 500 ETF by 6.6 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards M/I Homes Inc (NYSE:MHO) changed during the first quarter.
M/I Homes Inc (NYSE:MHO) was in 15 hedge funds’ portfolios at the end of the first quarter of 2019. MHO has seen an increase in support from the world’s most elite money managers of late. There were 12 hedge funds in our database with MHO positions at the end of the previous quarter. Our calculations also showed that MHO isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s check out the recent hedge fund action encompassing M/I Homes Inc (NYSE:MHO).
How are hedge funds trading M/I Homes Inc (NYSE:MHO)?
At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in MHO a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in M/I Homes Inc (NYSE:MHO) was held by Basswood Capital, which reported holding $12.4 million worth of stock at the end of March. It was followed by Royce & Associates with a $11.3 million position. Other investors bullish on the company included Balyasny Asset Management, D E Shaw, and Millennium Management.
As one would reasonably expect, key money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, established the largest position in M/I Homes Inc (NYSE:MHO). Balyasny Asset Management had $9.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $1.2 million position during the quarter. The following funds were also among the new MHO investors: Paul Marshall and Ian Wace’s Marshall Wace LLP and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s also examine hedge fund activity in other stocks similar to M/I Homes Inc (NYSE:MHO). We will take a look at United Financial Bancorp, Inc. (NASDAQ:UBNK), Westlake Chemical Partners LP (NYSE:WLKP), Bryn Mawr Bank Corp. (NASDAQ:BMTC), and Allegiance Bancshares, Inc. (NASDAQ:ABTX). This group of stocks’ market values match MHO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UBNK | 8 | 72006 | 1 |
| WLKP | 3 | 4659 | 2 |
| BMTC | 10 | 36361 | 2 |
| ABTX | 7 | 25758 | 1 |
| Average | 7 | 34696 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $48 million in MHO’s case. Bryn Mawr Bank Corp. (NASDAQ:BMTC) is the most popular stock in this table. On the other hand Westlake Chemical Partners LP (NYSE:WLKP) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks M/I Homes Inc (NYSE:MHO) is more popular among hedge funds. 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. Hedge funds were also right about betting on MHO, though not to the same extent, as the stock returned 6% during the same period and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
