In this article we will check out the progression of hedge fund sentiment towards Kirby Corporation (NYSE:KEX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Kirby Corporation (NYSE:KEX) was in 21 hedge funds’ portfolios at the end of March. KEX investors should pay attention to a decrease in support from the world’s most elite money managers recently. There were 26 hedge funds in our database with KEX positions at the end of the previous quarter. Our calculations also showed that KEX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the new hedge fund action encompassing Kirby Corporation (NYSE:KEX).
How are hedge funds trading Kirby Corporation (NYSE:KEX)?
At Q1’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KEX over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Diamond Hill Capital, managed by Ric Dillon, holds the biggest position in Kirby Corporation (NYSE:KEX). Diamond Hill Capital has a $116.2 million position in the stock, comprising 0.8% of its 13F portfolio. On Diamond Hill Capital’s heels is Slate Path Capital, led by David Greenspan, holding a $56.3 million position; the fund has 4.3% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism contain Chuck Royce’s Royce & Associates, Brian Gootzeit and Andrew Frank’s StackLine Partners and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position StackLine Partners allocated the biggest weight to Kirby Corporation (NYSE:KEX), around 16.03% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, dishing out 4.32 percent of its 13F equity portfolio to KEX.
Since Kirby Corporation (NYSE:KEX) has experienced a decline in interest from the smart money, we can see that there lies a certain “tier” of fund managers that slashed their full holdings heading into Q4. It’s worth mentioning that Alexander Mitchell’s Scopus Asset Management sold off the largest position of all the hedgies monitored by Insider Monkey, totaling about $55 million in stock. Robert Pohly’s fund, Samlyn Capital, also cut its stock, about $40.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Kirby Corporation (NYSE:KEX) but similarly valued. We will take a look at The Brink’s Company (NYSE:BCO), OneMain Holdings Inc (NYSE:OMF), Synovus Financial Corp. (NYSE:SNV), and Essent Group Ltd (NYSE:ESNT). All of these stocks’ market caps are closest to KEX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $288 million in KEX’s case. OneMain Holdings Inc (NYSE:OMF) is the most popular stock in this table. On the other hand The Brink’s Company (NYSE:BCO) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Kirby Corporation (NYSE:KEX) is even less popular than BCO. Hedge funds clearly dropped the ball on KEX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on KEX as the stock returned 25.9% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.