Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
Meritage Homes Corp (NYSE:MTH) has seen a decrease in activity from the world’s largest hedge funds of late. MTH was in 10 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with MTH positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Clovis Oncology Inc (NASDAQ:CLVS), Axovant Sciences Ltd (NYSE:AXON), and BroadSoft Inc (NASDAQ:BSFT) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, we’re going to go over the fresh action encompassing Meritage Homes Corp (NYSE:MTH).
Hedge fund activity in Meritage Homes Corp (NYSE:MTH)
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in MTH at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Ken Fisher of Fisher Asset Management holds the biggest position in Meritage Homes Corp (NYSE:MTH). Fisher Asset Management has a $62.7 million position in the stock. The second most bullish fund manager is Israel Englander of Millennium Management, one of the 10 largest hedge funds in the world with a $19.8 million position. Some other peers that are bullish encompass Greg Poole’s Echo Street Capital Management, Dmitry Balyasny’s Balyasny Asset Management and Ken Griffin’s Citadel Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually said goodbye to their positions entirely. It’s worth mentioning that Solomon Kumin’s Folger Hill Asset Management said goodbye to the biggest stake of all the hedgies studied by Insider Monkey, totaling close to $1.7 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped about $0.8 million worth of shares.
Let’s now review hedge fund activity in other stocks similar to Meritage Homes Corp (NYSE:MTH). These stocks are Clovis Oncology Inc (NASDAQ:CLVS), Axovant Sciences Ltd (NYSE:AXON), BroadSoft Inc (NASDAQ:BSFT), and Capital Bank Financial Corp (NASDAQ:CBF). This group of stocks’ market valuations resemble MTH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLVS | 33 | 752124 | 12 |
| AXON | 20 | 1198941 | 6 |
| BSFT | 13 | 104928 | -6 |
| CBF | 7 | 17378 | 1 |
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $518 million. That figure was $137 million in MTH’s case. Clovis Oncology Inc (NASDAQ:CLVS) is the most popular stock in this table. On the other hand Capital Bank Financial Corp (NASDAQ:CBF) is the least popular one with only 7 bullish hedge fund positions. Meritage Homes Corp (NYSE:MTH) 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. In this regard CLVS might be a better candidate to consider taking a long position in.
Disclosure: None
