Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
In this article, we are going to discuss D.R. Horton, Inc. (NYSE:DHI), which has seen an increase in hedge fund interest lately. More specifically, the company was included in the equity portfolios of 40 funds from our database at the end of September, compared to 31 funds a quarter earlier. At the end of this article we will also compare DHI to other stocks including Extra Space Storage, Inc. (NYSE:EXR), CGI Group Inc. (USA) (NYSE:GIB), and Alliance Data Systems Corporation (NYSE:ADS) to get a better sense of its popularity.
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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, let’s analyze the latest action surrounding D.R. Horton, Inc. (NYSE:DHI).
How are hedge funds trading D.R. Horton, Inc. (NYSE:DHI)?
As stated earlier, a total of 40 funds tracked by Insider Monkey held long positions in D.R. Horton at the end of the third quarter, up by 29% from the end of the second quarter. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness’ AQR Capital Management has the most valuable position in D.R. Horton, Inc. (NYSE:DHI), worth close to $206.7 million, corresponding to 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Greenhaven Associates, managed by Edgar Wachenheim, which holds a $204.7 million position; the fund has 3.9% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish consist of Ken Heebner’s Capital Growth Management, and Ross Margolies’ Stelliam Investment Management.
Now, specific money managers have been driving this bullishness. Israel Englander’s Millennium Management assembled the biggest position in D.R. Horton, Inc. (NYSE:DHI). Millennium Management had $73.1 million invested in the company at the end of the quarter. Crispin Odey’s Odey Asset Management Group also made a $47.5 million investment in the stock during the quarter. The following funds were also among the new DHI investors: Jim Simons’ Renaissance Technologies, D. E. Shaw’s D E Shaw, and Steve Cohen’s Point72 Asset Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as D.R. Horton, Inc. (NYSE:DHI) but similarly valued. We will take a look at Extra Space Storage, Inc. (NYSE:EXR), CGI Group Inc. (USA) (NYSE:GIB), Alliance Data Systems Corporation (NYSE:ADS), and Motorola Solutions Inc (NYSE:MSI). 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 |
|---|---|---|---|
| EXR | 21 | 96553 | 1 |
| GIB | 16 | 121641 | 1 |
| ADS | 32 | 1479453 | -1 |
| MSI | 28 | 1170738 | -1 |
As you can see these stocks had an average of 24 funds with bullish positions and the average amount invested in these stocks was $717 million. That figure was $1.10 billion in DHI’s case. Alliance Data Systems Corporation (NYSE:ADS) is the most popular stock in this table with 32 funds holding shares. On the other hand, CGI Group Inc. (USA) (NYSE:GIB) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks D.R. Horton, Inc. (NYSE:DHI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
