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Hedge Funds Cautiously Watching Kindred Biosciences Inc (KIN)

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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Kindred Biosciences Inc (NASDAQ:KIN).

Hedge fund interest in Kindred Biosciences Inc (NASDAQ:KIN) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare KIN to other stocks including The Bank of Princeton (NASDAQ:BPRN), scPharmaceuticals Inc. (NASDAQ:SCPH), and Alpha Pro Tech, Ltd. (NYSE:APT) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most stock holders, hedge funds are perceived as unimportant, old financial vehicles of yesteryear. While there are greater than 8000 funds in operation today, We look at the upper echelon of this group, approximately 850 funds. These money managers command most of all hedge funds’ total capital, and by following their highest performing stock picks, Insider Monkey has revealed a number of investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

John Rogers Ariel Investments

John Rogers of Ariel Investments

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 we’re going to take a glance at the new hedge fund action surrounding Kindred Biosciences Inc (NASDAQ:KIN).

What does smart money think about Kindred Biosciences Inc (NASDAQ:KIN)?

At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. On the other hand, there were a total of 10 hedge funds with a bullish position in KIN a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is KIN A Good Stock To Buy?

More specifically, Park West Asset Management was the largest shareholder of Kindred Biosciences Inc (NASDAQ:KIN), with a stake worth $27 million reported as of the end of September. Trailing Park West Asset Management was Ariel Investments, which amassed a stake valued at $7.1 million. Adage Capital Management, Renaissance Technologies, and Winton Capital Management 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 Park West Asset Management allocated the biggest weight to Kindred Biosciences Inc (NASDAQ:KIN), around 1.83% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, designating 0.12 percent of its 13F equity portfolio to KIN.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).

Let’s now review hedge fund activity in other stocks similar to Kindred Biosciences Inc (NASDAQ:KIN). These stocks are The Bank of Princeton (NASDAQ:BPRN), scPharmaceuticals Inc. (NASDAQ:SCPH), Alpha Pro Tech, Ltd. (NYSE:APT), and Liminal BioSciences Inc. (NASDAQ:LMNL). All of these stocks’ market caps resemble KIN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BPRN 3 11554 1
SCPH 6 61882 1
APT 5 15095 3
LMNL 1 21980 0
Average 3.75 27628 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.75 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $46 million in KIN’s case. scPharmaceuticals Inc. (NASDAQ:SCPH) is the most popular stock in this table. On the other hand Liminal BioSciences Inc. (NASDAQ:LMNL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Kindred Biosciences Inc (NASDAQ:KIN) is more popular among hedge funds. 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on KIN as the stock returned 30.5% so far in Q2 (through June 10th) 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.

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