With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was PulteGroup, Inc. (NYSE:PHM).
Is PHM a good stock to buy? The best stock pickers were getting more bullish. The number of long hedge fund bets increased by 2 lately. PulteGroup, Inc. (NYSE:PHM) was in 42 hedge funds’ portfolios at the end of March. The all time high for this statistic is 43. Our calculations also showed that PHM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Keeping this in mind let’s go over the recent hedge fund action surrounding PulteGroup, Inc. (NYSE:PHM).
Do Hedge Funds Think PHM Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PHM over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the biggest position in PulteGroup, Inc. (NYSE:PHM). Citadel Investment Group has a $175.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Cliff Asness of AQR Capital Management, with a $160.9 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Noam Gottesman’s GLG Partners, Dmitry Balyasny’s Balyasny Asset Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Prana Capital Management allocated the biggest weight to PulteGroup, Inc. (NYSE:PHM), around 4.56% of its 13F portfolio. GoldenTree Asset Management is also relatively very bullish on the stock, setting aside 1.73 percent of its 13F equity portfolio to PHM.
As industrywide interest jumped, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, established the biggest position in PulteGroup, Inc. (NYSE:PHM). Balyasny Asset Management had $85.9 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $14.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Cowley’s Sandbar Asset Management, Matthew Lindenbaum’s Basswood Capital, and Benjamin A. Smith’s Laurion Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to PulteGroup, Inc. (NYSE:PHM). These stocks are The J.M. Smucker Company (NYSE:SJM), Whirlpool Corporation (NYSE:WHR), Tata Motors Limited (NYSE:TTM), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), Williams-Sonoma, Inc. (NYSE:WSM), WestRock Company (NYSE:WRK), and Loews Corporation (NYSE:L). This group of stocks’ market values match PHM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SJM | 33 | 689844 | -1 |
| WHR | 28 | 1255044 | -4 |
| TTM | 8 | 67734 | 1 |
| BMRN | 43 | 1269182 | -8 |
| WSM | 29 | 758326 | 0 |
| WRK | 27 | 580223 | -16 |
| L | 21 | 200364 | 2 |
| Average | 27 | 688674 | -3.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $689 million. That figure was $1050 million in PHM’s case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 8 bullish hedge fund positions. PulteGroup, Inc. (NYSE:PHM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PHM is 84.9. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately PHM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PHM were disappointed as the stock returned 2.6% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Pultegroup Inc (NYSE:PHM)
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Disclosure: None. This article was originally published at Insider Monkey.
