July 23, 2024

Eurocean 2004

Life is an adventure

Ken Heebner’s CGM Flattens 5 Homebuilding Positions in 4th Quarter

Capital Growth Management, the firm co-founded by Ken Heebner (Trades, Portfolio), disclosed in February that its top five sells during the fourth quarter were all in the residential construction sector: Meritage Homes Corp. (NYSE:MTH), Lennar Corp. (NYSE:LEN), D.R. Horton Inc. (NYSE:DHI), LGI Homes Inc. (NASDAQ:LGIH) and Toll Brothers Inc. (NYSE:TOL).

The Boston-based money management firm seeks long-term capital appreciation through bold and swift sector calls. A growth-oriented firm, Capital Growth Management does not mind making large bets based on Heebner’s convictions.

861bd4ed2e52de88e3f0035cb3708cf9.png

As of December 2020, CGM’s $993 million equity portfolio contains 53 stocks, with 31 new holdings and a turnover ratio of 63{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9}. Despite this, the firm’s equity portfolio weight in the residential construction sector declined from the third-quarter 2020 weight of 44.09{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} to just 4.95{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} for the fourth quarter.

98fba3aff66c081836cf0a3da5fb4b89.png

Meritage Homes

CGM sold 620,000 shares of Meritage Homes (NYSE:MTH), shrinking the equity portfolio 7.15{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9}. Shares averaged $94.25 during the fourth quarter of 2020.

982c1e806604a110a80f56441c8b33f2.png

GuruFocus ranks the Scottsdale, Arizona-based homebuilder’s profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 9 and an operating margin that is near a 10-year high of 11.74{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} and outperforming over 68{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} of global competitors.

b9e6a918bab8a69949b9352a6f45b4fc.png

Gurus with holdings in Meritage include Ken Fisher (Trades, Portfolio)’s Fisher Investments and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.

e14ff1a6c42156f7264e40918d763055.png

Lennar

CGM sold 585,000 shares of Lennar (NYSE:LEN), axing 72.67{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} of the position and 4.99{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} of the equity portfolio. Shares averaged $77.28 during the fourth quarter.

742f083bcf5a3bd7956ff9641a5577b2.png

GuruFocus ranks the Miami-based company’s profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 and an operating margin that is near a 10-year high of 13.88{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} and outperforms over 75{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} of global competitors.

2e31c1ef3edf527bd39290fd7b5f89a8.png

D.R. Horton

CGM sold 580,000 shares of D.R. Horton (NYSE:DHI), trimming the position 65.91{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} and the equity portfolio 4.58{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9}. Shares averaged $72.85 during the fourth quarter.

8672db342b48113abbf04e90f10cf085.png

GuruFocus ranks the Arlington, Texas-based company’s profitability 9 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 and an operating margin that is near a 10-year high of 15.41{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} and outperforms close to 80{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} of global competitors.

09ae9134c5c1add1568ec017f82ff1a5.png

LGI Homes

CGM sold 335,000 shares of LGI Homes (NASDAQ:LGIH), paring the equity portfolio 4.07{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9}. Shares averaged $113.76 during the fourth quarter.

17791620b2c03596fc15b87cdfb04153.png

GuruFocus ranks the Woodlands, Texas-based company’s profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 8 and returns on assets that outperform over 95{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} of global competitors.

50344f6d7a2735f1c215fc81eace4626.png

Toll Brothers

CGM sold 660,000 shares of Toll Brothers (NYSE:TOL), paring the position 70.97{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} and the equity portfolio 3.36{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9}. Shares averaged $46.32 during the fourth quarter.

341bed4bc95e2bfe8ee18cfcf694d204.png

GuruFocus ranks the Pennsylvania-based homebuilder’s profitability 7 out of 10: Three-year revenue growth rates are outperforming approximately 82{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} of global competitors even though profit margins and returns are outperforming just over 55{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} of global residential construction companies.

78e846b7fafb877a9cfdcf448aaad245.png

Disclosure: No positions.

Read more here:

Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.

About the author:

James Li

I am an editorial researcher at GuruFocus. I have a Master’s in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li’s Website