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Hedge Funds Have Never Been More Bullish On Kaiser Aluminum Corp. (KALU)

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by more than 6 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Kaiser Aluminum Corp. (NASDAQ:KALU) from the perspective of those elite funds.

Kaiser Aluminum Corp. (NASDAQ:KALU) investors should be aware of an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that kalu isn’t among the 30 most popular stocks among hedge funds.

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. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

We’re going to take a peek at the key hedge fund action regarding Kaiser Aluminum Corp. (NASDAQ:KALU).

What does the smart money think about Kaiser Aluminum Corp. (NASDAQ:KALU)?

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in KALU a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with KALU Positions

Among these funds, Renaissance Technologies held the most valuable stake in Kaiser Aluminum Corp. (NASDAQ:KALU), which was worth $37.1 million at the end of the first quarter. On the second spot was GLG Partners which amassed $26.3 million worth of shares. Moreover, Fisher Asset Management, Royce & Associates, and Millennium Management were also bullish on Kaiser Aluminum Corp. (NASDAQ:KALU), allocating a large percentage of their portfolios to this stock.

With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Winton Capital Management, managed by David Harding, initiated the biggest position in Kaiser Aluminum Corp. (NASDAQ:KALU). Winton Capital Management had $1 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.6 million investment in the stock during the quarter. The other funds with brand new KALU positions are Minhua Zhang’s Weld Capital Management, David Costen Haley’s HBK Investments, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s also examine hedge fund activity in other stocks similar to Kaiser Aluminum Corp. (NASDAQ:KALU). These stocks are The Simply Good Foods Company (NASDAQ:SMPL), Papa John’s International, Inc. (NASDAQ:PZZA), TTEC Holdings, Inc. (NASDAQ:TTEC), and Dril-Quip, Inc. (NYSE:DRQ). This group of stocks’ market valuations are similar to KALU’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SMPL 22 202596 -3
PZZA 22 361199 -1
TTEC 15 27264 0
DRQ 17 142274 -2
Average 19 183333 -1.5

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 $183 million. That figure was $134 million in KALU’s case. The Simply Good Foods Company (NASDAQ:SMPL) is the most popular stock in this table. On the other hand TTEC Holdings, Inc. (NASDAQ:TTEC) is the least popular one with only 15 bullish hedge fund positions. Kaiser Aluminum Corp. (NASDAQ:KALU) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately KALU wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KALU investors were disappointed as the stock returned -12.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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