Hedge Funds Aren’t Crazy About KKR & Co Inc. (KKR) Anymore

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 873 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 30th holdings, data that is available nowhere else. Should you consider KKR & Co Inc. (NYSE:KKR) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is KKR & Co Inc. (NYSE:KKR) a marvelous investment today? Hedge funds were becoming less hopeful. The number of long hedge fund bets were cut by 2 in recent months. KKR & Co Inc. (NYSE:KKR) was in 54 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 56. Our calculations also showed that KKR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 56 hedge funds in our database with KKR holdings at the end of March.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a look at the recent hedge fund action encompassing KKR & Co Inc. (NYSE:KKR).

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

At Q2’s end, a total of 54 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the first quarter of 2020. By comparison, 45 hedge funds held shares or bullish call options in KKR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in KKR & Co Inc. (NYSE:KKR) was held by ValueAct Capital, which reported holding $1612.6 million worth of stock at the end of June. It was followed by Akre Capital Management with a $872.8 million position. Other investors bullish on the company included Diamond Hill Capital, Egerton Capital Limited, and Ariel Investments. In terms of the portfolio weights assigned to each position ValueAct Capital allocated the biggest weight to KKR & Co Inc. (NYSE:KKR), around 19.28% of its 13F portfolio. Hudson Way Capital Management is also relatively very bullish on the stock, setting aside 16.87 percent of its 13F equity portfolio to KKR.

Because KKR & Co Inc. (NYSE:KKR) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds that decided to sell off their full holdings last quarter. Interestingly, Panayotis Takis Sparaggis’s Alkeon Capital Management sold off the biggest stake of the “upper crust” of funds watched by Insider Monkey, worth close to $118.3 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $11.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to KKR & Co Inc. (NYSE:KKR). These stocks are LyondellBasell Industries NV (NYSE:LYB), Yum! Brands, Inc. (NYSE:YUM), Archer Daniels Midland Company (NYSE:ADM), Hilton Worldwide Holdings Inc (NYSE:HLT), Zimmer Biomet Holdings Inc (NYSE:ZBH), Rockwell Automation Inc. (NYSE:ROK), and Chewy, Inc. (NYSE:CHWY). All of these stocks’ market caps match KKR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.7 hedge funds with bullish positions and the average amount invested in these stocks was $1413 million. That figure was $5348 million in KKR’s case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Rockwell Automation Inc. (NYSE:ROK) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks KKR & Co Inc. (NYSE:KKR) is more popular among hedge funds. Our overall hedge fund sentiment score for KKR is 81.9. 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 22.9% in 2021 through October 1st but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on KKR as the stock returned 4.3% since the end of June (through 10/1) 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.