Is KapStone Paper and Packaging Corp. (NYSE:KS) a sound stock to buy now? Hedge funds are taking a bullish view. The number of bullish hedge fund bets inched up by 1 recently.
In the 21st century investor’s toolkit, there are many indicators shareholders can use to monitor the equity markets. Two of the best are hedge fund and insider trading interest. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the top investment managers can outpace the broader indices by a very impressive amount (see just how much).
Just as integral, optimistic insider trading activity is another way to parse down the financial markets. There are a number of reasons for a corporate insider to cut shares of his or her company, but just one, very clear reason why they would behave bullishly. Various empirical studies have demonstrated the impressive potential of this method if you understand what to do (learn more here).
Keeping this in mind, it's important to take a glance at the key action surrounding KapStone Paper and Packaging Corp. (NYSE:KS).
At the end of the fourth quarter, a total of 9 of the hedge funds we track were long in this stock, a change of 13% from the third quarter. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes considerably.
When looking at the hedgies we track, Richard Rubin's Hawkeye Capital had the biggest position in KapStone Paper and Packaging Corp. (NYSE:KS), worth close to $69.1 million, comprising 33.6% of its total 13F portfolio. The second largest stake is held by Stephen J. Errico of Locust Wood Capital Advisers, with a $5.6 million position; 1.6% of its 13F portfolio is allocated to the company. Other hedge funds that are bullish include D. E. Shaw's D E Shaw, Jim Simons's Renaissance Technologies and John Fichthorn's Dialectic Capital Management.
As aggregate interest increased, some big names have been driving this bullishness. Locust Wood Capital Advisers, managed by Stephen J. Errico, created the most outsized position in KapStone Paper and Packaging Corp. (NYSE:KS). Locust Wood Capital Advisers had 5.6 million invested in the company at the end of the quarter. Jim Simons's Renaissance Technologies also made a $1.4 million investment in the stock during the quarter. The other funds with brand new KS positions are John Overdeck and David Siegel's Two Sigma Advisors and Ken Griffin's Citadel Investment Group.
Bullish insider trading is particularly usable when the company we're looking at has experienced transactions within the past six months. Over the latest 180-day time frame, KapStone Paper and Packaging Corp. (NYSE:KS) has seen zero unique insiders purchasing, and 4 insider sales (see the details of insider trades here).
Let's also take a look at hedge fund and insider activity in other stocks similar to KapStone Paper and Packaging Corp. (NYSE:KS). These stocks are Resolute Forest Products Inc (NYSE:RFP), Buckeye Technologies Inc. (NYSE:BKI), Clearwater Paper Corp (NYSE:CLW), and Schweitzer-Mauduit International, Inc. (NYSE:SWM). All of these stocks are in the paper & paper products industry and their market caps match KS's market cap.