Was The Smart Money Right About Lennar Corporation (LEN)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Lennar Corporation (NYSE:LEN) and determine whether the smart money was really smart about this stock.

Lennar Corporation (NYSE:LEN) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 50 hedge funds’ portfolios at the end of the third quarter of 2021. Our calculations also showed that LEN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Fifth Third Bancorp (NASDAQ:FITB), Alexandria Real Estate Equities Inc (NYSE:ARE), and MPLX LP (NYSE:MPLX) to gather more data points.

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 we’re going to take a peek at the fresh hedge fund action regarding Lennar Corporation (NYSE:LEN).

Rajiv Jain of GQG Partners

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

At the end of the third quarter, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2021. By comparison, 60 hedge funds held shares or bullish call options in LEN 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, Greenhaven Associates was the largest shareholder of Lennar Corporation (NYSE:LEN), with a stake worth $656 million reported as of the end of September. Trailing Greenhaven Associates was GQG Partners, which amassed a stake valued at $190.4 million. AQR Capital Management, Eminence Capital, and Citadel Investment Group 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 Greenhaven Associates allocated the biggest weight to Lennar Corporation (NYSE:LEN), around 21.87% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, earmarking 5.06 percent of its 13F equity portfolio to LEN.

Since Lennar Corporation (NYSE:LEN) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of hedgies that slashed their positions entirely heading into Q4. Intriguingly, Peter Seuss’s Prana Capital Management sold off the largest position of the “upper crust” of funds monitored by Insider Monkey, worth close to $15.7 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund said goodbye to about $14.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Lennar Corporation (NYSE:LEN). These stocks are Fifth Third Bancorp (NASDAQ:FITB), Alexandria Real Estate Equities Inc (NYSE:ARE), MPLX LP (NYSE:MPLX), Carnival Corporation & plc (NYSE:CCL), Nucor Corporation (NYSE:NUE), Valero Energy Corporation (NYSE:VLO), and Orange SA (NYSE:ORAN). This group of stocks’ market values resemble LEN’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $271 million. That figure was $1706 million in LEN’s case. Carnival Corporation & plc (NYSE:CCL) is the most popular stock in this table. On the other hand Orange SA (NYSE:ORAN) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Lennar Corporation (NYSE:LEN) is more popular among hedge funds. Our overall hedge fund sentiment score for LEN is 77.7. 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 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on LEN as the stock returned 3.3% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.

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Disclosure: None. This article was originally published at Insider Monkey.