Do hedge funds like The New Home Company Inc. (NWHM)?
Of the thousands of stocks that are currently traded in the market, it is difficult to identify which ones will truly generate strong returns. Hedge funds and institutional investors spend millions of dollars on MBA and PhD analysts who are industry experts and well connected to other industry insiders and media. Individual investors can rely on hedge funds employing these talents and can thus benefit from their vast resources and knowledge. We analyze quarterly 13F deposits from nearly 900 hedge funds, and by examining the smart money sentiment that surrounds a stock, we can determine if it has the potential to beat the market in the long term. Therefore, let’s take a closer look at what The New Home Company Inc.’s smart money thinks (NYSE:NWHM).
The New Home Company Inc. (NYSE:NWHM) has seen a drop in hedge fund interest lately. The New Home Company Inc. (NYSE:NWHM) appeared in 5 hedge fund portfolios at the end of March. The highest historical value for this statistic is 8. Our calculations also showed that NWHM is not among the 30 most popular stocks among hedge funds (click for Q1 ranking).
In the financial world, there are a large number of signals that shareholders use to evaluate their investments in stocks. Some of the lesser-known signals are hedge fund and insider trading movements. We have shown that historically those who follow the best choices of the best investment managers can beat the market by a very impressive amount (see details here). Additionally, our monthly newsletter’s long stock picks portfolio has returned 206.8% since March 2017 (through May 2021) and has beaten the S&P 500 Index by over 115 percentage points. You can download a sample issue of this newsletter on our website .
Fred DiSanto of Ancora Advisors
At Insider Monkey, we scour multiple sources to uncover the next big investing idea. For example, an activist hedge fund wants to buy this $ 27 biotech share for $ 50. We therefore recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best stocks of batteries to choose the next Tesla which will offer a 10x return. Even though we only recommend positions in a tiny fraction of the companies we analyze, we check as many stocks as possible. We read letters from hedge fund investors and listen to market arguments at hedge fund conferences. You can subscribe to our free daily newsletter at our home page. With all of that in mind, we’ll be checking out the new hedge fund action surrounding The New Home Company Inc. (NYSE:NWHM).
Do hedge funds think NWHM is a good stock to buy now?
At the end of March, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a variation of -17% compared to the fourth quarter of 2020. Below, you can see the evolution of hedge sentiment funds. to NWHM during the last 23 quarters. So let’s see which hedge funds were among the top stock holders and which hedge funds were making big moves.
More precisely, Royce & Associates was the largest shareholder of The New Home Company Inc. (NYSE: NWHM), with a stake valued at $ 5.3 million reported at the end of March. Lagging behind Royce & Associates was Gratia Capital, which raised a stake valued at $ 1.1 million. Renaissance Technologies, Two Sigma Advisors and Ancora Advisors were also very fond of the stock, becoming one of the largest hedge fund holders in the company. In terms of portfolio weights assigned to each position Capital Gratia assigned the largest weight to The New Home Company Inc. (NYSE: NWHM), approximately 1.64% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, assigning 0.04% of its 13F equity portfolio to NWHM.
We believe that hedge fund activity on the stock is unfavorable, but in this case there was only one hedge fund that sold its entire position: Millennium management. A hedge fund that sells its entire position does not always imply a bearish intention. Theoretically, a hedge fund can decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think that’s the case in this case, as none of the more than 750 hedge funds tracked by Insider Monkey identified NWHM as a viable investment and initiated a position in the stock.
Let’s also look at the activity of hedge funds in other stocks similar to The New Home Company Inc. (NYSE: NWHM). We’ll take a look at Fuel Tech Inc. (NASDAQ:FTEK), Cyclerion Therapeutics, Inc. (NASDAQ:CYCN), Coda Octopus Group, Inc. (NASDAQ:CODA), Taoping Inc. (NASDAQ:TAOP), J. Jill, Inc. (NYSE:JILLE), Diffusion Pharmaceuticals Inc. (NASDAQ:DFFN) and Core Molding Technologies, Inc. (NYSE:CMT). The market capitalizations of this group of shares correspond to the market capitalization of NWHM.
[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of HF position FTEK, 4.9600.1 CYCN, 9.30854.1 CODA, 2.858.2 TAOP, 1.214, -1 JILL, 4, 10738.2 DFFN, 3.2026.0 CMT, 3.17252, -1 Medium, 3.7.10220.0.6 [/table]
See the table here if you have formatting problems.
As you can see, these stocks had an average of 3.7 hedge funds with bullish positions and the average amount invested in these stocks was $ 10 million. That figure was $ 8 million in the case of NWHM. Cyclerion Therapeutics, Inc. (NASDAQ:CYCN) is the most popular action in this table. On the other hand Taoping Inc. (NASDAQ:TAOP) is the least popular with only 1 bullish hedge fund positions. The New Home Company Inc. (NYSE: NWHM) isn’t the most popular stock in this group, but hedge fund interest is still above average. Our overall hedge fund sentiment score for NWHM is 47.8. Stocks with a 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 have shown 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 17.4% in 2021 through June 18 and have consistently beat the market by 6.1 percentage points. Hedge funds were also right to bet on NWHM as the stock has returned 13.7% since the end of the first quarter (through June 18) and has outperformed the market. Hedge funds have been rewarded for their relative optimism.
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Disclosure: none. This article originally appeared on Monkey initiate.