How do we determine whether Forestar Group Inc. (NYSE:FOR) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Forestar Group Inc. undervalued? The smart money is becoming less confident. The number of long hedge fund positions shrunk by 5 lately. FOR was in 8 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with FOR holdings at the end of the previous quarter. At the end of this article we will also compare FOR to other stocks, including ReTailMeNot Inc (NASDAQ:SALE), Sunedison Semiconductor Ltd (NASDAQ:SEMI), and Fred’s, Inc. (NASDAQ:FRED) to get a better sense of its popularity.
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At the moment there are many formulas stock market investors employ to size up stocks. A pair of the best formulas are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace the broader indices by a very impressive amount (see the details here).
Now, we’re going to go over the fresh action surrounding Forestar Group Inc. (NYSE:FOR).
How are hedge funds trading Forestar Group Inc. (NYSE:FOR)?
Heading into Q4, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the second quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cove Street Capital, managed by Jeffrey Bronchick, holds the number one position in Forestar Group Inc. (NYSE:FOR). Cove Street Capital has a $34.3 million position in the stock, comprising 4.5% of its 13F portfolio. The second largest stake is held by Carlson Capital, managed by Clint Carlson, which holds a $13.8 million position; 0.2% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism encompass Steve Pei’s Gratia Capital, Andrew Wallach and Jason Ader’s Cumberland Associates / Springowl Associates and Chuck Royce’s Royce & Associates.
Because Forestar Group Inc. (NYSE:FOR) has experienced declining sentiment from hedge fund managers, logic holds that there is a sect of money managers that decided to sell off their full holdings last quarter. It’s worth mentioning that Parag Vora’s HG Vora Capital Management sold off the biggest stake of the “upper crust” of funds monitored by Insider Monkey, worth close to $10.5 million in stock, and Geoffrey Raynor’s Q Investments (Specter Holdings) was right behind this move, as the fund said goodbye to about $5.4 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 5 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Forestar Group Inc. (NYSE:FOR). We will take a look at ReTailMeNot Inc (NASDAQ:SALE), Sunedison Semiconductor Ltd (NASDAQ:SEMI), Fred’s, Inc. (NASDAQ:FRED), and Global Brass and Copper Holdings Inc (NYSE:BRSS). This group of stocks’ market values resemble FOR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SALE | 15 | 79722 | -6 |
| SEMI | 21 | 216785 | -3 |
| FRED | 5 | 1638 | -2 |
| BRSS | 21 | 36057 | 2 |
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $67 million in FOR’s case. Sunedison Semiconductor Ltd (NASDAQ:SEMI) is the most popular stock in this table with 21 funds reporting stakes, while Fred’s, Inc. (NASDAQ:FRED) is the least popular one. Forestar Group Inc. (NYSE:FOR) 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 SEMI might be a better candidate to consider a long position.
