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Do Hedge Funds Love Kimball International Inc (KBAL)?

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Kimball International Inc (NASDAQ:KBAL) from the perspective of those elite funds.

Is Kimball International Inc (NASDAQ:KBAL) going to take off soon? Hedge funds are in a bearish mood. The number of long hedge fund positions decreased by 1 recently. Our calculations also showed that KBAL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). KBAL was in 12 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with KBAL positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are plenty of methods investors have at their disposal to grade publicly traded companies. Some of the most underrated methods are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce the broader indices by a healthy amount (see the details here).

New York Stock Exchange

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy  based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s analyze the new hedge fund action surrounding Kimball International Inc (NASDAQ:KBAL).

How are hedge funds trading Kimball International Inc (NASDAQ:KBAL)?

Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the second quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in KBAL a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Kimball International Inc (NASDAQ:KBAL), with a stake worth $52.3 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $40.3 million. AQR Capital Management, D E Shaw, and Ancora Advisors 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 Royce & Associates allocated the biggest weight to Kimball International Inc (NASDAQ:KBAL), around 0.37% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, setting aside 0.31 percent of its 13F equity portfolio to KBAL.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Tudor Investment Corp. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified KBAL as a viable investment and initiated a position in the stock.

Let’s now review hedge fund activity in other stocks similar to Kimball International Inc (NASDAQ:KBAL). These stocks are C&J Energy Services, Inc (NYSE:CJ), Ready Capital Corporation (NYSE:RC), Vanda Pharmaceuticals Inc. (NASDAQ:VNDA), and Universal Electronics Inc (NASDAQ:UEIC). This group of stocks’ market values are closest to KBAL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CJ 18 116969 -3
RC 4 40767 -2
VNDA 18 187961 0
UEIC 12 30699 -1
Average 13 94099 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $124 million in KBAL’s case. C&J Energy Services, Inc (NYSE:CJ) is the most popular stock in this table. On the other hand Ready Capital Corporation (NYSE:RC) is the least popular one with only 4 bullish hedge fund positions. Kimball International Inc (NASDAQ:KBAL) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on KBAL as the stock returned 10.8% during the first two months of Q4 and outperformed the market by an even larger margin.

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

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