Did Hedge Funds Catch A Break With Kohl’s Corporation (KSS)?

Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Kohl’s Corporation (NYSE:KSS) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Kohl’s Corporation (NYSE:KSS) was in 37 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 42. KSS has experienced a decrease in hedge fund sentiment lately. There were 40 hedge funds in our database with KSS positions at the end of the second quarter. Our calculations also showed that KSS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Ryan Frick Dorsal Capital

Ryan Frick of Dorsal Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a gander at the key hedge fund action regarding Kohl’s Corporation (NYSE:KSS).

Do Hedge Funds Think KSS Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KSS over the last 25 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Is KSS A Good Stock To Buy?

Among these funds, Arrowstreet Capital held the most valuable stake in Kohl’s Corporation (NYSE:KSS), which was worth $199.8 million at the end of the third quarter. On the second spot was Ancora Advisors which amassed $167.6 million worth of shares. Two Sigma Advisors, Dorsal Capital Management, and Appaloosa Management LP were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Legion Partners Asset Management allocated the biggest weight to Kohl’s Corporation (NYSE:KSS), around 11.02% of its 13F portfolio. Engine Capital is also relatively very bullish on the stock, earmarking 6.61 percent of its 13F equity portfolio to KSS.

Due to the fact that Kohl’s Corporation (NYSE:KSS) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there were a few money managers who were dropping their entire stakes last quarter. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group cut the biggest position of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $31.8 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund cut about $29.1 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Kohl’s Corporation (NYSE:KSS) but similarly valued. We will take a look at Pilgrim’s Pride Corporation (NASDAQ:PPC), Old Republic International Corporation (NYSE:ORI), Starwood Property Trust, Inc. (NYSE:STWD), PLDT Inc. (NYSE:PHI), Choice Hotels International, Inc. (NYSE:CHH), Synaptics Incorporated (NASDAQ:SYNA), and Oshkosh Corporation (NYSE:OSK). This group of stocks’ market values are closest to KSS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PPC 25 254968 7
ORI 20 357593 -6
STWD 12 161117 1
PHI 5 104426 0
CHH 17 151994 2
SYNA 23 493437 -4
OSK 31 263682 3
Average 19 255317 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $951 million in KSS’s case. Oshkosh Corporation (NYSE:OSK) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Kohl’s Corporation (NYSE:KSS) is more popular among hedge funds. Our overall hedge fund sentiment score for KSS is 78.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 29.6% in 2021 and managed to beat the market by another 3.6 percentage points. Hedge funds were also right about betting on KSS as the stock returned 27.4% since the end of September (through 1/31) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.