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Hedge Funds Have Never Been This Bullish On KKR & Co Inc. (KKR)

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 at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of KKR & Co Inc. (NYSE:KKR).

KKR & Co Inc. (NYSE:KKR) was in 41 hedge funds’ portfolios at the end of September. KKR investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. There were 36 hedge funds in our database with KKR positions at the end of the previous quarter. Our calculations also showed that KKR 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.

Jeff Ubben VALUEACT CAPITAL

Jeffrey Ubben of ValueAct Capital

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 view the new hedge fund action regarding KKR & Co Inc. (NYSE:KKR).

Hedge fund activity in KKR & Co Inc. (NYSE:KKR)

At Q3’s end, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the second quarter of 2019. On the other hand, there were a total of 31 hedge funds with a bullish position in KKR a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

KKR_nov2019

When looking at the institutional investors followed by Insider Monkey, Jeffrey Ubben’s ValueAct Capital has the number one position in KKR & Co Inc. (NYSE:KKR), worth close to $1.2915 billion, corresponding to 13.9% of its total 13F portfolio. The second largest stake is held by Akre Capital Management, managed by Charles Akre, which holds a $342.5 million position; the fund has 3.4% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish comprise Ric Dillon’s Diamond Hill Capital, Richard S. Pzena’s Pzena Investment Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Hudson Way Capital Management allocated the biggest weight to KKR & Co Inc. (NYSE:KKR), around 14.19% of its portfolio. ValueAct Capital is also relatively very bullish on the stock, setting aside 13.93 percent of its 13F equity portfolio to KKR.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, assembled the biggest position in KKR & Co Inc. (NYSE:KKR). Citadel Investment Group had $200.1 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also initiated a $74.8 million position during the quarter. The following funds were also among the new KKR investors: Peter Seuss’s Prana Capital Management, George Soros’s Soros Fund Management, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also examine hedge fund activity in other stocks similar to KKR & Co Inc. (NYSE:KKR). We will take a look at Synchrony Financial (NYSE:SYF), Veeva Systems Inc (NYSE:VEEV), American Water Works Company, Inc. (NYSE:AWK), and Aptiv PLC (NYSE:APTV). This group of stocks’ market values are closest to KKR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SYF 43 2375436 -3
VEEV 33 1020379 -2
AWK 35 652077 12
APTV 27 887545 1
Average 34.5 1233859 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $1234 million. That figure was $3227 million in KKR’s case. Synchrony Financial (NYSE:SYF) is the most popular stock in this table. On the other hand Aptiv PLC (NYSE:APTV) is the least popular one with only 27 bullish hedge fund positions. KKR & Co Inc. (NYSE:KKR) 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 KKR, though not to the same extent, as the stock returned 10.3% during the first two months of the fourth quarter and outperformed the market as well.

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

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