Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Lennar Corporation (NYSE:LEN).
Lennar Corporation (NYSE:LEN) shares haven't seen a lot of action during the third 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). At the end of this article we will also compare LEN to other stocks including Fifth Third Bancorp (NASDAQ:FITB), Alexandria Real Estate Equities Inc (NYSE:ARE), and MPLX LP (NYSE:MPLX) to get a better sense of its popularity.
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. Now we're going to analyze the recent hedge fund action encompassing Lennar Corporation (NYSE:LEN).
Ricky Sandler of Eminence Capital
Do Hedge Funds Think LEN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LEN over the last 25 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Edgar Wachenheim's Greenhaven Associates has the most valuable position in Lennar Corporation (NYSE:LEN), worth close to $656 million, amounting to 21.9% of its total 13F portfolio. Sitting at the No. 2 spot is GQG Partners, led by Rajiv Jain, holding a $190.4 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions include Cliff Asness's AQR Capital Management, Ricky Sandler's Eminence Capital and Ken Griffin's Citadel Investment Group. 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, dishing out 5.06 percent of its 13F equity portfolio to LEN.
Because Lennar Corporation (NYSE:LEN) has faced falling interest from the smart money, we can see that there lies a certain "tier" of money managers who were dropping their entire stakes last quarter. It's worth mentioning that Peter Seuss's Prana Capital Management cut the biggest stake of the 750 funds monitored by Insider Monkey, valued at an estimated $15.7 million in stock. Ryan Tolkin (CIO)'s fund, Schonfeld Strategic Advisors, also dumped its stock, about $14.3 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Lennar Corporation (NYSE:LEN) but similarly valued. 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 caps are similar to LEN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FITB,28,283754,-13 ARE,26,489883,-2 MPLX,8,90948,-3 CCL,36,520667,5 NUE,25,199344,-7 VLO,32,289108,-6 ORAN,3,20523,0 Average,22.6,270604,-3.7 [/table]
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 returned 28.6% in 2021 through November 30th but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on LEN as the stock returned 12.4% since the end of September (through 11/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.