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Hedge Funds Have Never Been More Bullish On Quaker Chemical Corporation (KWR)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find write-ups about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves and analyze what the smart money thinks of Quaker Chemical Corporation (NYSE:KWR) based on that data.

Is Quaker Chemical Corporation (NYSE:KWR) going to take off soon? Money managers are taking an optimistic view. The number of long hedge fund positions moved up by 2 lately. Our calculations also showed that KWR isn’t among the 30 most popular stocks among hedge funds (view the video below). KWR was in 13 hedge funds’ portfolios at the end of the second quarter of 2019. There were 11 hedge funds in our database with KWR holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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’ 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 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 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.

Dmitry Balyasny

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the new hedge fund action encompassing Quaker Chemical Corporation (NYSE:KWR).

Hedge fund activity in Quaker Chemical Corporation (NYSE:KWR)

Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in KWR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with KWR Positions

According to Insider Monkey’s hedge fund database, Royce & Associates, managed by Chuck Royce, holds the biggest position in Quaker Chemical Corporation (NYSE:KWR). Royce & Associates has a $137.4 million position in the stock, comprising 1.2% of its 13F portfolio. On Royce & Associates’s heels is Ken Griffin of Citadel Investment Group, with a $3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism consist of Dmitry Balyasny’s Balyasny Asset Management, Benjamin A. Smith’s Laurion Capital Management and Noam Gottesman’s GLG Partners.

Now, specific money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, established the biggest position in Quaker Chemical Corporation (NYSE:KWR). Balyasny Asset Management had $2 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $1.7 million investment in the stock during the quarter. The other funds with brand new KWR positions are Noam Gottesman’s GLG Partners and Mike Vranos’s Ellington.

Let’s also examine hedge fund activity in other stocks similar to Quaker Chemical Corporation (NYSE:KWR). We will take a look at PotlatchDeltic Corporation (NASDAQ:PCH), Owens-Illinois Inc (NYSE:OI), MakeMyTrip Limited (NASDAQ:MMYT), and Iridium Communications Inc. (NASDAQ:IRDM). All of these stocks’ market caps are similar to KWR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PCH 12 321079 -5
OI 21 341003 -2
MMYT 11 61298 -1
IRDM 12 114056 0
Average 14 209359 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $150 million in KWR’s case. Owens-Illinois Inc (NYSE:OI) is the most popular stock in this table. On the other hand MakeMyTrip Limited (NASDAQ:MMYT) is the least popular one with only 11 bullish hedge fund positions. Quaker Chemical Corporation (NYSE:KWR) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately KWR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KWR investors were disappointed as the stock returned -21.9% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.

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

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