Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool for identifying the next stock to invest in.
Is William Lyon Homes (NYSE:WLH) worth your attention right now? Investors who are in the know are turning bullish. The number of long hedge fund positions went up by 7 in recent months. At the end of this article we will also compare WLH to other stocks including Washington Trust Bancorp (NASDAQ:WASH), Mercer International Inc. (NASDAQ:MERC), and First Potomac Realty Trust (NYSE:FPO) to get a better sense of its popularity.
Follow William Lyon Homes (NYSE:WLH)
Follow William Lyon Homes (NYSE:WLH)
In today’s marketplace there are plenty of formulas market participants put to use to analyze stocks. Some of the most underrated formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outperform the market by a very impressive amount (see the details here).
Now, we’re going to take a gander at the latest action surrounding William Lyon Homes (NYSE:WLH).
How have hedgies been trading William Lyon Homes (NYSE:WLH)?
At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a 50% rise from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or had already accumulated large positions).
Of the funds tracked by Insider Monkey, John Paulson’s Paulson & Co has the biggest position in William Lyon Homes (NYSE:WLH), worth close to $68.4 million, corresponding to 0.4% of its total 13F portfolio. The second-most bullish fund manager is Luxor Capital Group, led by Christian Leone, holding a $49.3 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Other peers with similar optimism comprise Ken Griffin’s Citadel Investment Group, Robert Hockett’s Covalent Capital Partners, and Ken Heebner’s Capital Growth Management.
Now, key money managers were breaking ground themselves. Three Corner Global Investors, managed by Gunnar Overstrom, initiated the most valuable position in William Lyon Homes (NYSE:WLH). Three Corner Global Investors had $3.3 million invested in the company at the end of the quarter. Ken Fisher’s Fisher Asset Management also made a $3.1 million investment in the stock during the quarter. The following funds were also among the new WLH investors: Michael Platt and William Reeves’ BlueCrest Capital Mgmt., Leon Cooperman’s Omega Advisors, and Peter Muller’s PDT Partners.
Let’s check out hedge fund activity in other stocks similar to William Lyon Homes (NYSE:WLH). These stocks are Washington Trust Bancorp (NASDAQ:WASH), Mercer International Inc. (NASDAQ:MERC), First Potomac Realty Trust (NYSE:FPO), and United Financial Bancorp, Inc. (NASDAQ:UBNK). This group of stocks’ market valuations are closest to WLH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WASH | 5 | 15590 | 3 |
| MERC | 19 | 217977 | -4 |
| FPO | 11 | 33344 | -2 |
| UBNK | 11 | 46480 | 3 |
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $310 million in WLH’s case. Mercer International Inc. (NASDAQ:MERC) is the most popular stock in this table. On the other hand Washington Trust Bancorp (NASDAQ:WASH) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks William Lyon Homes (NYSE:WLH) is more popular among hedge funds, and its popularity is growing. Considering that hedge funds are fond of this stock in relation to its market cap peers and have far more money invested in it, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
