While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding M/I Homes Inc (NYSE:MHO).
M/I Homes Inc (NYSE:MHO) investors should pay attention to a decrease in enthusiasm from smart money recently. M/I Homes Inc (NYSE:MHO) was in 16 hedge funds’ portfolios at the end of March. The all time high for this statistic is 20. There were 18 hedge funds in our database with MHO positions at the end of the fourth quarter. Our calculations also showed that MHO 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.
Clint Carlson of Carlson Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 go over the new hedge fund action encompassing M/I Homes Inc (NYSE:MHO).
Do Hedge Funds Think MHO Is A Good Stock To Buy Now?
At Q1’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in MHO over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Basswood Capital held the most valuable stake in M/I Homes Inc (NYSE:MHO), which was worth $40 million at the end of the fourth quarter. On the second spot was Balyasny Asset Management which amassed $35.3 million worth of shares. Arrowstreet Capital, Carlson Capital, and Marshall Wace LLP 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 Gratia Capital allocated the biggest weight to M/I Homes Inc (NYSE:MHO), around 4.2% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, setting aside 1.81 percent of its 13F equity portfolio to MHO.
Seeing as M/I Homes Inc (NYSE:MHO) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there were a few hedgies who sold off their positions entirely last quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group said goodbye to the biggest position of all the hedgies followed by Insider Monkey, worth an estimated $2.3 million in stock, and Renaissance Technologies was right behind this move, as the fund dumped about $2.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to M/I Homes Inc (NYSE:MHO). These stocks are Palomar Holdings, Inc. (NASDAQ:PLMR), Nexgen Energy Ltd. (NYSE:NXE), BioAtla, Inc. (NASDAQ:BCAB), Krystal Biotech, Inc. (NASDAQ:KRYS), Castle Biosciences, Inc. (NASDAQ:CSTL), Endo International plc (NASDAQ:ENDP), and HeadHunter Group PLC (NASDAQ:HHR). This group of stocks’ market valuations are similar to MHO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PLMR | 11 | 21720 | 2 |
| NXE | 13 | 40684 | 0 |
| BCAB | 13 | 418366 | -3 |
| KRYS | 8 | 367379 | -4 |
| CSTL | 17 | 413863 | -4 |
| ENDP | 17 | 406138 | 4 |
| HHR | 7 | 5977 | 0 |
| Average | 12.3 | 239161 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.3 hedge funds with bullish positions and the average amount invested in these stocks was $239 million. That figure was $114 million in MHO’s case. Castle Biosciences, Inc. (NASDAQ:CSTL) is the most popular stock in this table. On the other hand HeadHunter Group PLC (NASDAQ:HHR) is the least popular one with only 7 bullish hedge fund positions. M/I Homes Inc (NYSE:MHO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MHO is 72. 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 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately MHO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MHO were disappointed as the stock returned -0.2% since the end of March (through 7/23) 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/I Homes Inc. (NYSE:MHO)
Follow M/I Homes Inc. (NYSE:MHO)
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Disclosure: None. This article was originally published at Insider Monkey.
