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Hedge Funds Have Never Been This Bullish On KBR, Inc. (KBR)

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 third quarter. You can find articles 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 over the last 4 years and analyze what the smart money thinks of KBR, Inc. (NYSE:KBR) based on that data.

KBR, Inc. (NYSE:KBR) was in 29 hedge funds’ portfolios at the end of September. KBR has seen an increase in enthusiasm from smart money in recent months. There were 22 hedge funds in our database with KBR positions at the end of the previous quarter. Our calculations also showed that KBR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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’ 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Joe Huber - Huber Capital Management

Joe Huber of Huber Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s review the latest hedge fund action regarding KBR, Inc. (NYSE:KBR).

How have hedgies been trading KBR, Inc. (NYSE:KBR)?

At Q3’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 32% from the previous quarter. The graph below displays the number of hedge funds with bullish position in KBR over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

KBR_dec2019

When looking at the institutional investors followed by Insider Monkey, Aaron Cowen’s Suvretta Capital Management has the number one position in KBR, Inc. (NYSE:KBR), worth close to $77.6 million, accounting for 2% of its total 13F portfolio. The second largest stake is held by Huber Capital Management, managed by Joe Huber, which holds a $76.9 million position; 9.5% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish contain Richard S. Pzena’s Pzena Investment Management, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Yost Capital Management allocated the biggest weight to KBR, Inc. (NYSE:KBR), around 10.41% of its portfolio. Huber Capital Management is also relatively very bullish on the stock, dishing out 9.52 percent of its 13F equity portfolio to KBR.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Hudson Way Capital Management, managed by William Hyatt, assembled the most valuable position in KBR, Inc. (NYSE:KBR). Hudson Way Capital Management had $13.4 million invested in the company at the end of the quarter. Carson Yost’s Yost Capital Management also initiated a $8.7 million position during the quarter. The other funds with new positions in the stock are Guy Shahar’s DSAM Partners, Minhua Zhang’s Weld Capital Management, and Donald Sussman’s Paloma Partners.

Let’s also examine hedge fund activity in other stocks similar to KBR, Inc. (NYSE:KBR). These stocks are Cosan Limited (NYSE:CZZ), Tandem Diabetes Care Inc (NASDAQ:TNDM), CarGurus, Inc. (NASDAQ:CARG), and White Mountains Insurance Group Ltd (NYSE:WTM). This group of stocks’ market caps are closest to KBR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CZZ 15 198653 0
TNDM 34 587351 1
CARG 21 813076 1
WTM 16 185765 -1
Average 21.5 446211 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $446 million. That figure was $541 million in KBR’s case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand Cosan Limited (NYSE:CZZ) is the least popular one with only 15 bullish hedge fund positions. KBR, Inc. (NYSE:KBR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on KBR as the stock returned 21.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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