Is Meritage Homes Corp (MTH) A Good Stock To Buy?

In this article we will analyze whether Meritage Homes Corp (NYSE:MTH) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is MTH a good stock to buy? Meritage Homes Corp (NYSE:MTH) investors should pay attention to an increase in hedge fund interest recently. Meritage Homes Corp (NYSE:MTH) was in 27 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 30. Our calculations also showed that MTH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla 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. With all of this in mind let’s take a look at the new hedge fund action regarding Meritage Homes Corp (NYSE:MTH).

Matthew Lindenbaum of Basswood Capital

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

At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 35% from the second quarter of 2021. By comparison, 25 hedge funds held shares or bullish call options in MTH a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Fisher Asset Management was the largest shareholder of Meritage Homes Corp (NYSE:MTH), with a stake worth $115.9 million reported as of the end of September. Trailing Fisher Asset Management was Balyasny Asset Management, which amassed a stake valued at $56.5 million. Citadel Investment Group, Basswood Capital, and Shellback Capital 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 Shellback Capital allocated the biggest weight to Meritage Homes Corp (NYSE:MTH), around 1.64% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, setting aside 1.17 percent of its 13F equity portfolio to MTH.

Consequently, key money managers were leading the bulls’ herd. D E Shaw, managed by D. E. Shaw, created the most outsized call position in Meritage Homes Corp (NYSE:MTH). D E Shaw had $2.6 million invested in the company at the end of the quarter. Matthew Crandall Gilman’s Hill Winds Capital also made a $2.4 million investment in the stock during the quarter. The other funds with brand new MTH positions are Jinghua Yan’s TwinBeech Capital, Michael Gelband’s ExodusPoint Capital, and Greg Eisner’s Engineers Gate Manager.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Meritage Homes Corp (NYSE:MTH) but similarly valued. We will take a look at Six Flags Entertainment Corp (NYSE:SIX), Millicom International Cellular S.A. (NASDAQ:TIGO), VEON Ltd. (NASDAQ:VEON), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), BRP Group, Inc. (NASDAQ:BRP), Ameris Bancorp (NASDAQ:ABCB), and Karuna Therapeutics, Inc. (NASDAQ:KRTX). This group of stocks’ market caps resemble MTH’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 $348 million. That figure was $371 million in MTH’s case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand Millicom International Cellular S.A. (NASDAQ:TIGO) is the least popular one with only 7 bullish hedge fund positions. Meritage Homes Corp (NYSE:MTH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MTH is 65.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Hedge funds were also right about betting on MTH as the stock returned 22.5% since the end of Q3 (through 12/9) 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.