Was The Smart Money Right About Lennar (LEN)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Lennar Corporation (NYSE:LEN).

Lennar Corporation (NYSE:LEN) investors should be aware of a decrease in hedge fund interest lately. Lennar Corporation (NYSE:LEN) was in 52 hedge funds’ portfolios at the end of December. The all time high for this statistic is 66. There were 60 hedge funds in our database with LEN holdings at the end of September. Our calculations also showed that LEN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

To most stock holders, hedge funds are seen as unimportant, old financial vehicles of the past. While there are over 8000 funds trading today, Our researchers hone in on the moguls of this club, about 850 funds. These money managers orchestrate most of the smart money’s total capital, and by watching their unrivaled picks, Insider Monkey has determined many investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 we’re going to analyze the latest hedge fund action surrounding Lennar Corporation (NYSE:LEN).

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

Heading into the first quarter of 2021, a total of 52 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LEN over the last 22 quarters. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Greenhaven Associates held the most valuable stake in Lennar Corporation (NYSE:LEN), which was worth $575.1 million at the end of the fourth quarter. On the second spot was Eminence Capital which amassed $155.5 million worth of shares. Theleme Partners, Fisher Asset Management, and Echo Street Capital Management 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 10.83% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, designating 4.13 percent of its 13F equity portfolio to LEN.

Since Lennar Corporation (NYSE:LEN) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of fund managers that slashed their entire stakes heading into Q1. At the top of the heap, Bill Miller’s Miller Value Partners cut the biggest investment of the 750 funds monitored by Insider Monkey, valued at close to $44.6 million in stock, and Stanley Druckenmiller’s Duquesne Capital was right behind this move, as the fund dropped about $15.1 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 8 funds heading into Q1.

Let’s now review hedge fund activity in other stocks similar to Lennar Corporation (NYSE:LEN). We will take a look at Valero Energy Corporation (NYSE:VLO), KKR & Co Inc. (NYSE:KKR), ViacomCBS Inc. (NASDAQ:VIAC), Ameriprise Financial, Inc. (NYSE:AMP), Old Dominion Freight Line, Inc. (NASDAQ:ODFL), Garmin Ltd. (NASDAQ:GRMN), and Ryanair Holdings plc (NASDAQ:RYAAY). All of these stocks’ market caps match LEN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.6 hedge funds with bullish positions and the average amount invested in these stocks was $1186 million. That figure was $1530 million in LEN’s case. KKR & Co Inc. (NYSE:KKR) is the most popular stock in this table. On the other hand Ryanair Holdings plc (NASDAQ:RYAAY) is the least popular one with only 23 bullish hedge fund positions. Lennar Corporation (NYSE:LEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LEN is 67.4. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on LEN as the stock returned 36.6% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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