Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards D.R. Horton, Inc. (NYSE:DHI) changed recently.
Is D.R. Horton (DHI) a buy or sell? The best stock pickers were taking an optimistic view. The number of long hedge fund positions went up by 2 in recent months. D.R. Horton, Inc. (NYSE:DHI) was in 64 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 66. Our calculations also showed that DHI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 62 hedge funds in our database with DHI holdings at the end of September.
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 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 S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. 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 homepage (or at the end of this article). With all of this in mind let’s take a glance at the fresh hedge fund action encompassing D.R. Horton, Inc. (NYSE:DHI).
Do Hedge Funds Think DHI Is A Good Stock To Buy Now?
At the end of December, a total of 64 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DHI over the last 22 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Egerton Capital Limited was the largest shareholder of D.R. Horton, Inc. (NYSE:DHI), with a stake worth $728 million reported as of the end of December. Trailing Egerton Capital Limited was Soros Fund Management, which amassed a stake valued at $255.3 million. Greenhaven Associates, Millennium Management, and Echo Street Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Land & Buildings Investment Management allocated the biggest weight to D.R. Horton, Inc. (NYSE:DHI), around 5.57% of its 13F portfolio. Mountaineer Partners Management is also relatively very bullish on the stock, designating 5.18 percent of its 13F equity portfolio to DHI.
With a general bullishness amongst the heavyweights, specific money managers have jumped into D.R. Horton, Inc. (NYSE:DHI) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the most valuable position in D.R. Horton, Inc. (NYSE:DHI). Citadel Investment Group had $69.9 million invested in the company at the end of the quarter. Renaissance Technologies also made a $50.7 million investment in the stock during the quarter. The other funds with brand new DHI positions are Dmitry Balyasny’s Balyasny Asset Management, John Smith Clark’s Southpoint Capital Advisors, and Michael Gelband’s ExodusPoint Capital.
Let’s go over hedge fund activity in other stocks similar to D.R. Horton, Inc. (NYSE:DHI). These stocks are Weyerhaeuser Co. (NYSE:WY), ZTO Express (Cayman) Inc. (NYSE:ZTO), PG&E Corporation (NYSE:PCG), Verisign, Inc. (NASDAQ:VRSN), Keysight Technologies Inc (NYSE:KEYS), ArcelorMittal (NYSE:MT), and Coupa Software Incorporated (NASDAQ:COUP). This group of stocks’ market valuations match DHI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WY | 40 | 614210 | -1 |
| ZTO | 17 | 426129 | -5 |
| PCG | 66 | 6651557 | -10 |
| VRSN | 47 | 6421904 | 1 |
| KEYS | 27 | 592599 | -9 |
| MT | 18 | 511254 | -2 |
| COUP | 62 | 4125119 | 12 |
| Average | 39.6 | 2763253 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.6 hedge funds with bullish positions and the average amount invested in these stocks was $2763 million. That figure was $1923 million in DHI’s case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand ZTO Express (Cayman) Inc. (NYSE:ZTO) is the least popular one with only 17 bullish hedge fund positions. D.R. Horton, Inc. (NYSE:DHI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DHI is 84.1. 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 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on DHI as the stock returned 21.6% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
