In this article we will check out the progression of hedge fund sentiment towards M.D.C. Holdings, Inc. (NYSE:MDC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
M.D.C. Holdings, Inc. (NYSE:MDC) has seen an increase in hedge fund sentiment recently. M.D.C. Holdings, Inc. (NYSE:MDC) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistic is 25. There were 13 hedge funds in our database with MDC positions at the end of the first quarter. Our calculations also showed that MDC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Steven Cohen of Point72 Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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. With all of this in mind let’s analyze the latest hedge fund action surrounding M.D.C. Holdings, Inc. (NYSE:MDC).
Do Hedge Funds Think MDC Is A Good Stock To Buy Now?
At Q2’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 69% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MDC over the last 24 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of M.D.C. Holdings, Inc. (NYSE:MDC), with a stake worth $16.5 million reported as of the end of June. Trailing Millennium Management was Fisher Asset Management, which amassed a stake valued at $8.7 million. Citadel Investment Group, Renaissance Technologies, and Bridgewater Associates 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 Sciencast Management allocated the biggest weight to M.D.C. Holdings, Inc. (NYSE:MDC), around 0.15% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to MDC.
Now, specific money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, assembled the most outsized position in M.D.C. Holdings, Inc. (NYSE:MDC). Citadel Investment Group had $4.6 million invested in the company at the end of the quarter. Renaissance Technologies also made a $4.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Steve Cohen’s Point72 Asset Management, and Mika Toikka’s AlphaCrest Capital Management.
Let’s also examine hedge fund activity in other stocks similar to M.D.C. Holdings, Inc. (NYSE:MDC). These stocks are ExlService Holdings, Inc. (NASDAQ:EXLS), Bed Bath & Beyond Inc. (NASDAQ:BBBY), Hilton Grand Vacations Inc. (NYSE:HGV), AdaptHealth Corp. (NASDAQ:AHCO), Applied Industrial Technologies Inc (NYSE:AIT), Fabrinet (NYSE:FN), and Insight Enterprises, Inc. (NASDAQ:NSIT). This group of stocks’ market values are similar to MDC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EXLS | 15 | 60301 | 1 |
| BBBY | 21 | 363664 | -2 |
| HGV | 34 | 973469 | 0 |
| AHCO | 20 | 366938 | 3 |
| AIT | 18 | 57979 | -3 |
| FN | 14 | 125328 | -1 |
| NSIT | 19 | 368371 | 2 |
| Average | 20.1 | 330864 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $331 million. That figure was $52 million in MDC’s case. Hilton Grand Vacations Inc. (NYSE:HGV) is the most popular stock in this table. On the other hand Fabrinet (NYSE:FN) is the least popular one with only 14 bullish hedge fund positions. M.D.C. Holdings, Inc. (NYSE:MDC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MDC is 56.4. 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 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately MDC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MDC were disappointed as the stock returned -0.8% since the end of June (through 10/22) 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 M.d.c. Holdings Inc. (NYSE:MDC)
Follow M.d.c. Holdings Inc. (NYSE:MDC)
Suggested Articles:
- 15 Most Powerful Weapons In The World
- 15 Biggest Travel Companies
- 10 Best Telecom Stocks to Buy Right Now
Disclosure: None. This article was originally published at Insider Monkey.
