Should You Buy Kennametal Inc. (KMT)?

Since Kennametal Inc. (NYSE:KMT) has faced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of fund managers who sold off their positions entirely last quarter. At the top of the heap, Peter Muller’s PDT Partners said goodbye to the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $2.5 million in stock. Chao Ku’s fund, Nine Chapters Capital Management, also dumped its stock, about $1.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Kennametal Inc. (NYSE:KMT) but similarly valued. We will take a look at Kite Realty Group Trust (NYSE:KRG), Ellie Mae Inc (NYSE:ELLI), Kythera Biopharmaceuticals Inc (NASDAQ:KYTH), and Masimo Corporation (NASDAQ:MASI). All of these stocks’ market caps match KMT’s market cap.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $220 million. That figure was $531 million in KMT’s case. Ellie Mae Inc (NYSE:ELLI) is the most popular stock in this table. On the other hand, Kite Realty Group Trust (NYSE:KRG) is the least popular one with only 7 bullish hedge fund positions. Kennametal Inc. (NYSE:KMT) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ELLI might be a better candidate to consider a long position.