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Is KeyCorp (KEY) Going to Burn These Hedge Funds?

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KeyCorp (NYSE:KEY) was in 30 hedge funds’ portfolio at the end of the first quarter of 2013. KEY has experienced a decrease in hedge fund interest in recent months. There were 34 hedge funds in our database with KEY positions at the end of the previous quarter.

According to most shareholders, hedge funds are perceived as slow, outdated investment vehicles of years past. While there are greater than 8000 funds in operation today, we at Insider Monkey hone in on the crème de la crème of this group, about 450 funds. It is widely believed that this group oversees the lion’s share of the smart money’s total asset base, and by paying attention to their best equity investments, we have formulated a number of investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

KeyCorpJust as key, positive insider trading sentiment is another way to break down the world of equities. Obviously, there are a variety of incentives for an upper level exec to downsize shares of his or her company, but just one, very clear reason why they would buy. Several academic studies have demonstrated the useful potential of this method if “monkeys” understand what to do (learn more here).

Keeping this in mind, let’s take a glance at the latest action regarding KeyCorp (NYSE:KEY).

How are hedge funds trading KeyCorp (NYSE:KEY)?

Heading into Q2, a total of 30 of the hedge funds we track were long in this stock, a change of -12% from the previous quarter. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings meaningfully.

KeyCorp (NYSE:KEY)When looking at the hedgies we track, Martin Whitman’s Third Avenue Management had the most valuable position in KeyCorp (NYSE:KEY), worth close to $211 million, comprising 4.1% of its total 13F portfolio. Coming in second is Cliff Asness of AQR Capital Management, with a $105.2 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other peers that hold long positions include Richard S. Pzena’s Pzena Investment Management, Jim Simons’s Renaissance Technologies and John Brennan’s Sirios Capital Management.

Judging by the fact that KeyCorp (NYSE:KEY) has experienced bearish sentiment from the smart money, logic holds that there exists a select few hedgies that slashed their positions entirely last quarter. Intriguingly, Phill Gross and Robert Atchinson’s Adage Capital Management sold off the biggest stake of the “upper crust” of funds we monitor, valued at about $20.5 million in stock.. Ken Gray and Steve Walsh’s fund, Bryn Mawr Capital, also sold off its stock, about $11.2 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 4 funds last quarter.

How have insiders been trading KeyCorp (NYSE:KEY)?

Bullish insider trading is particularly usable when the primary stock in question has experienced transactions within the past 180 days. Over the last half-year time period, KeyCorp (NYSE:KEY) has experienced 1 unique insiders purchasing, and 2 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to KeyCorp (NYSE:KEY). These stocks are Canadian Imperial Bank of Commerce (USA) (NYSE:CM), First Republic Bank (NYSE:FRC), SunTrust Banks, Inc. (NYSE:STI) and Credicorp Ltd. (USA) (NYSE:BAP). This group of stocks are in the money center banks industry and their market caps match KEY’s market cap.

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