Is NVR, Inc. (NYSE:NVR) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They fail miserably sometimes but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
Is NVR, Inc. (NYSE:NVR) undervalued? The smart money is in a bearish mood. The number of long hedge fund bets decreased by 3 lately. NVR was in 22 hedge funds’ portfolios at the end of September. There were 25 hedge funds in our database with NVR holdings at the end of the previous quarter. At the end of this article we will also compare NVR to other stocks including Apartment Investment and Management Co. (NYSE:AIV), American Campus Communities, Inc. (NYSE:ACC), and NetApp Inc. (NASDAQ:NTAP) to get a better sense of its popularity.
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We pay attention to hedge fund sentiment not only for theoretical reasons but also for practical reasons. 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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Hedge fund activity in NVR, Inc. (NYSE:NVR)
Heading into the fourth quarter of 2016, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from one quarter earlier. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who already accumulated large positions in the stock.
Of the funds tracked by Insider Monkey, Robert Bishop’s Impala Asset Management has the largest position in NVR, Inc. (NYSE:NVR), worth close to $212.4 million, amounting to 14% of its total 13F portfolio. The second most bullish fund manager is AQR Capital Management, a quant hedge fund managed by Cliff Asness, which holds a $69.4 million position. Some other peers that hold long positions include Alan Fournier’s Pennant Capital Management, Ken Griffin’s Citadel Investment Group and Ken Heebner’s Capital Growth Management.
Seeing as NVR, Inc. (NYSE:NVR) has witnessed declining sentiment from the smart money, it’s safe to say that there were a few hedge funds who sold off their positions entirely by the end of the third quarter. Intriguingly, Jeff Lignelli’s Incline Global Management sold off the largest position of the 700 funds followed by Insider Monkey, comprising close to $29.1 million in stock, and Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors was right behind this move, as the fund dropped about $13.5 million worth.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as NVR, Inc. (NYSE:NVR) but similarly valued. We will take a look at Apartment Investment and Management Co. (NYSE:AIV), American Campus Communities, Inc. (NYSE:ACC), NetApp Inc. (NASDAQ:NTAP), and Jack Henry & Associates, Inc. (NASDAQ:JKHY). This group of stocks’ market valuations are closest to NVR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AIV | 16 | 164712 | -4 |
| ACC | 17 | 140709 | 0 |
| NTAP | 28 | 387760 | 9 |
| JKHY | 13 | 172363 | -2 |
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $591 million in NVR’s case. NetApp Inc. (NASDAQ:NTAP) is the most popular stock in this table. On the other hand Jack Henry & Associates, Inc. (NASDAQ:JKHY) is the least popular one with only 13 bullish hedge fund positions. NVR, Inc. (NYSE:NVR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NTAP, which we analyzed a few days ago, might be a better candidate to consider a long position.
