In the eyes of most market participants, hedge funds are assumed to be worthless, outdated financial tools of the past. While there are greater than 8000 funds in operation at present, we look at the bigwigs of this club, around 450 funds. Most estimates calculate that this group has its hands on most of the hedge fund industry’s total asset base, and by tracking their best investments, we have found a number of investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).
Equally as key, optimistic insider trading activity is a second way to break down the world of equities. Just as you’d expect, there are many stimuli for an insider to sell shares of his or her company, but only one, very obvious reason why they would buy. Plenty of academic studies have demonstrated the useful potential of this tactic if investors understand what to do (learn more here).
Consequently, we’re going to take a gander at the key action surrounding Hovnanian Enterprises, Inc. (NYSE:HOV).
How have hedgies been trading Hovnanian Enterprises, Inc. (NYSE:HOV)?
Heading into Q2, a total of 20 of the hedge funds we track were bullish in this stock, a change of 54% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly.
According to our comprehensive database, Randall Smith’s Alden Global Capital had the most valuable position in Hovnanian Enterprises, Inc. (NYSE:HOV), worth close to $26 million, comprising 4.5% of its total 13F portfolio. Sitting at the No. 2 spot is Brigade Capital, managed by Don Morgan, which held a $11.3 million position; 0.7% of its 13F portfolio is allocated to the company. Some other peers that hold long positions include Chuck Royce’s Royce & Associates, Ken Griffin’s Citadel Investment Group and Bruce Kovner’s Caxton Associates LP.
Consequently, some big names have been driving this bullishness. Caxton Associates LP, managed by Bruce Kovner, created the largest position in Hovnanian Enterprises, Inc. (NYSE:HOV). Caxton Associates LP had 5.8 million invested in the company at the end of the quarter. Carl Tiedemann and Michael Tiedemann’s TIG Advisors also initiated a $0.5 million position during the quarter. The following funds were also among the new HOV investors: Neil Chriss’s Hutchin Hill Capital, Brian Taylor’s Pine River Capital Management, and Matthew Tewksbury’s Stevens Capital Management.
What do corporate executives and insiders think about Hovnanian Enterprises, Inc. (NYSE:HOV)?
Bullish insider trading is most useful when the company we’re looking at has seen transactions within the past half-year. Over the latest half-year time period, Hovnanian Enterprises, Inc. (NYSE:HOV) has seen zero unique insiders purchasing, and 2 insider sales (see the details of insider trades here).
Let’s check out hedge fund and insider activity in other stocks similar to Hovnanian Enterprises, Inc. (NYSE:HOV). These stocks are Meritage Homes Corp (NYSE:MTH), Xinyuan Real Estate Co., Ltd. (ADR) (NYSE:XIN), Beazer Homes USA, Inc. (NYSE:BZH), M/I Homes Inc (NYSE:MHO), and Gafisa SA (ADR) (NYSE:GFA). This group of stocks belong to the residential construction industry and their market caps match HOV’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Meritage Homes Corp (NYSE:MTH) | 20 | 0 | 8 |
| Xinyuan Real Estate Co., Ltd. (ADR) (NYSE:XIN) | 5 | 0 | 0 |
| Beazer Homes USA, Inc. (NYSE:BZH) | 17 | 0 | 0 |
| M/I Homes Inc (NYSE:MHO) | 14 | 1 | 4 |
| Gafisa SA (ADR) (NYSE:GFA) | 7 | 0 | 0 |
With the results exhibited by our strategies, everyday investors must always watch hedge fund and insider trading sentiment, and Hovnanian Enterprises, Inc. (NYSE:HOV) is an important part of this process.
