Is AMH Stock A Buy or Sell?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards American Homes 4 Rent (NYSE:AMH).

Is AMH stock a buy? American Homes 4 Rent (NYSE:AMH) has seen an increase in hedge fund sentiment in recent months. American Homes 4 Rent (NYSE:AMH) was in 27 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 27. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AMH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. With all of this in mind let’s take a look at the new hedge fund action surrounding American Homes 4 Rent (NYSE:AMH).

Do Hedge Funds Think AMH Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the third quarter of 2020. On the other hand, there were a total of 23 hedge funds with a bullish position in AMH a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in American Homes 4 Rent (NYSE:AMH) was held by Echo Street Capital Management, which reported holding $117.7 million worth of stock at the end of December. It was followed by Long Pond Capital with a $101.2 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and Land & Buildings Investment Management. In terms of the portfolio weights assigned to each position Land & Buildings Investment Management allocated the biggest weight to American Homes 4 Rent (NYSE:AMH), around 6.97% of its 13F portfolio. 59 North Capital is also relatively very bullish on the stock, setting aside 6.86 percent of its 13F equity portfolio to AMH.

Consequently, key hedge funds were leading the bulls’ herd. Long Pond Capital, managed by John Khoury, assembled the most valuable position in American Homes 4 Rent (NYSE:AMH). Long Pond Capital had $101.2 million invested in the company at the end of the quarter. Michael Bilger’s 59 North Capital also made a $18.4 million investment in the stock during the quarter. The following funds were also among the new AMH investors: Dmitry Balyasny’s Balyasny Asset Management, Alec Litowitz and Ross Laser’s Magnetar Capital, and Donald Sussman’s Paloma Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as American Homes 4 Rent (NYSE:AMH) but similarly valued. These stocks are Magellan Midstream Partners, L.P. (NYSE:MMP), BorgWarner Inc. (NYSE:BWA), Tenaris S.A. (NYSE:TS), AngloGold Ashanti Limited (NYSE:AU), Everest Re Group Ltd (NYSE:RE), Darling Ingredients Inc. (NYSE:DAR), and New Fortress Energy LLC (NASDAQ:NFE). This group of stocks’ market caps match AMH’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $387 million. That figure was $504 million in AMH’s case. Darling Ingredients Inc. (NYSE:DAR) is the most popular stock in this table. On the other hand New Fortress Energy LLC (NASDAQ:NFE) is the least popular one with only 11 bullish hedge fund positions. American Homes 4 Rent (NYSE:AMH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMH is 70. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on AMH as the stock returned 18% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.

Follow Insider Monkey on Twitter