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Hedge Funds Aren’t Crazy About Kinsale Capital Group, Inc. (KNSL) Anymore

In this article you are going to find out whether hedge funds think Kinsale Capital Group, Inc. (NASDAQ:KNSL) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Kinsale Capital Group, Inc. (NASDAQ:KNSL) was in 7 hedge funds’ portfolios at the end of March. KNSL shareholders have witnessed a decrease in support from the world’s most elite money managers lately. There were 11 hedge funds in our database with KNSL holdings at the end of the previous quarter. Our calculations also showed that KNSL 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Driehaus of Driehaus Capital

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 stocks recommended/scorned by legendary Bill Miller. 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. With all of this in mind let’s take a glance at the latest hedge fund action regarding Kinsale Capital Group, Inc. (NASDAQ:KNSL).

How are hedge funds trading Kinsale Capital Group, Inc. (NASDAQ:KNSL)?

Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -36% from the fourth quarter of 2019. On the other hand, there were a total of 9 hedge funds with a bullish position in KNSL a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Among these funds, Driehaus Capital held the most valuable stake in Kinsale Capital Group, Inc. (NASDAQ:KNSL), which was worth $17.3 million at the end of the third quarter. On the second spot was PEAK6 Capital Management which amassed $5.3 million worth of shares. AQR Capital Management, D E Shaw, and Citadel Investment Group 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 Driehaus Capital allocated the biggest weight to Kinsale Capital Group, Inc. (NASDAQ:KNSL), around 0.58% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, earmarking 0.18 percent of its 13F equity portfolio to KNSL.

Because Kinsale Capital Group, Inc. (NASDAQ:KNSL) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedge funds who were dropping their entire stakes heading into Q4. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management cut the biggest stake of the 750 funds monitored by Insider Monkey, valued at about $0.4 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund dropped about $0.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Kinsale Capital Group, Inc. (NASDAQ:KNSL) but similarly valued. These stocks are Foot Locker, Inc. (NYSE:FL), South Jersey Industries Inc (NYSE:SJI), Marriott Vacations Worldwide Corporation (NYSE:VAC), and UFP Industries, Inc. (NASDAQ:UFPI). All of these stocks’ market caps are closest to KNSL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FL 21 147084 -8
SJI 13 88904 -5
VAC 25 299416 0
UFPI 17 67371 -10
Average 19 150694 -5.75

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 $151 million. That figure was $24 million in KNSL’s case. Marriott Vacations Worldwide Corporation (NYSE:VAC) is the most popular stock in this table. On the other hand South Jersey Industries Inc (NYSE:SJI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Kinsale Capital Group, Inc. (NASDAQ:KNSL) is even less popular than SJI. Hedge funds clearly dropped the ball on KNSL 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on KNSL as the stock returned 51.4% so far in the second quarter and outperformed the market by an even larger margin.

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