Hedge Fund Consensus Stocks vs. KBR, Inc. (KBR) In 2019

Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 31.2% last year. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.3% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like KBR, Inc. (NYSE:KBR).

Is KBR, Inc. (NYSE:KBR) a splendid investment right now? The best stock pickers are betting on the stock. The number of bullish hedge fund positions advanced by 7 lately. Our calculations also showed that KBR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). KBR was in 29 hedge funds’ portfolios at the end of the third quarter of 2019. There were 22 hedge funds in our database with KBR holdings at the end of the previous quarter.

In today’s marketplace there are numerous signals stock market investors use to analyze their stock investments. Some of the best signals are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the elite money managers can trounce the market by a superb margin (see the details here).

Joe Huber - Huber Capital Management

Joe Huber of Huber Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we’re going to check out the new hedge fund action encompassing KBR, Inc. (NYSE:KBR).

Hedge fund activity in KBR, Inc. (NYSE:KBR)

Heading into the fourth quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KBR over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Suvretta Capital Management, managed by Aaron Cowen, holds the largest position in KBR, Inc. (NYSE:KBR). Suvretta Capital Management has a $77.6 million position in the stock, comprising 2% of its 13F portfolio. Sitting at the No. 2 spot is Huber Capital Management, managed by Joe Huber, which holds a $76.9 million position; 9.5% of its 13F portfolio is allocated to the stock. Other peers that are bullish consist of Richard S. Pzena’s Pzena Investment Management, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Yost Capital Management allocated the biggest weight to KBR, Inc. (NYSE:KBR), around 10.41% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, earmarking 9.52 percent of its 13F equity portfolio to KBR.

As one would reasonably expect, key money managers have been driving this bullishness. Hudson Way Capital Management, managed by William Hyatt, established the most outsized position in KBR, Inc. (NYSE:KBR). Hudson Way Capital Management had $13.4 million invested in the company at the end of the quarter. Carson Yost’s Yost Capital Management also initiated a $8.7 million position during the quarter. The following funds were also among the new KBR investors: Guy Shahar’s DSAM Partners, Minhua Zhang’s Weld Capital Management, and Donald Sussman’s Paloma Partners.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as KBR, Inc. (NYSE:KBR) but similarly valued. These stocks are Cosan Limited (NYSE:CZZ), Tandem Diabetes Care Inc (NASDAQ:TNDM), CarGurus, Inc. (NASDAQ:CARG), and White Mountains Insurance Group Ltd (NYSE:WTM). This group of stocks’ market values are similar to KBR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CZZ 15 198653 0
TNDM 34 587351 1
CARG 21 813076 1
WTM 16 185765 -1
Average 21.5 446211 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $446 million. That figure was $541 million in KBR’s case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand Cosan Limited (NYSE:CZZ) is the least popular one with only 15 bullish hedge fund positions. KBR, Inc. (NYSE:KBR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on KBR as the stock returned 103.6% in 2019 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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