One of the Smartest Hedge Funds Around is Calling a Bottom in Housing

May 18, 2011 12:38 PM EDT
Despite unprecedented efforts by the U.S. government to support the housing market, recent data has led some to call an official "double dip" in housing. Amid the dismal headlines, one smart hedge fund manager is loading up on home-building stocks on the view that the bottom is in.

David Tepper of Appaloosa Management, the man who's "buy everything" trade in 2010 made him a Wall Street legend, is now buying homebuilder stocks hand-over-fist. In the first quarter, Tepper opened new positions in five homebuilders and one building product company.

According to his latest filing with the SEC, Tepper disclosed that he now owns 1,367,679 shares of Beazer Homes (NYSE: BZH), 1,119,740 shares of D.R. Horton (NYSE: DHI), 1,388,900 shares of KB Home (NYSE: KBH), 1,637,112 shares of PulteGroup (NYSE: PHM), and 198,100 shares Ryland Group, Inc. (NYSE: RYL). He also now owns 394,614 shares of cabinet maker Masco Corp. (NYSE: MAS).

The positions are small on an individual basis, with KB Home ranking the highest in portfolio among the group with a value of just $15.8 million. However, taken together the stakes add up to approximately $55 million - not a huge bet for a man of Tepper's stature, but respectable.

If you would have followed Tepper with his "buy everything" trade in September 2010 you would be sitting pretty right now. Another great example of his trading acumen is his contrarian purchase of Dean Foods (NYSE: DF), which he saw a 50% gain on since disclosing the purchase to the public in January of this year.

Tepper’s track record speaks for itself and therefore it may be time to start looking at these homebuilders for your own portfolio. Investors could also diversify amongst the group by buying ETF SPDR S&P Homebuilders (NYSE: XHB).

To track all of Tepper's moves, click here for our new Hedge Fund Insider section.

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Kansai on 2011-05-18 13:10:06
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Tepper ALSO made a huge bet on financials and CSCO and failed miserably.

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