In this article we will check out the progression of hedge fund sentiment towards Kimberly Clark Corporation (NYSE:KMB) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Kimberly Clark Corporation (NYSE:KMB) a buy here? Hedge funds are buying. The number of long hedge fund positions moved up by 9 recently. Our calculations also showed that KMB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 44 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. 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. Now let’s analyze the fresh hedge fund action regarding Kimberly Clark Corporation (NYSE:KMB).
What have hedge funds been doing with Kimberly Clark Corporation (NYSE:KMB)?
Heading into the second quarter of 2020, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from one quarter earlier. On the other hand, there were a total of 36 hedge funds with a bullish position in KMB a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Kimberly Clark Corporation (NYSE:KMB), which was worth $304.6 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $222.1 million worth of shares. Holocene Advisors, Alkeon Capital Management, and D E Shaw 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 Sandbar Asset Management allocated the biggest weight to Kimberly Clark Corporation (NYSE:KMB), around 2.38% of its 13F portfolio. Holocene Advisors is also relatively very bullish on the stock, designating 1.61 percent of its 13F equity portfolio to KMB.
Now, specific money managers have jumped into Kimberly Clark Corporation (NYSE:KMB) headfirst. Renaissance Technologies,established the most valuable position in Kimberly Clark Corporation (NYSE:KMB). Renaissance Technologies had $71.7 million invested in the company at the end of the quarter. Michael Hintze’s CQS Cayman LP also initiated a $16.9 million position during the quarter. The following funds were also among the new KMB investors: Dmitry Balyasny’s Balyasny Asset Management, Steven Boyd’s Armistice Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s also examine hedge fund activity in other stocks similar to Kimberly Clark Corporation (NYSE:KMB). We will take a look at Marsh & McLennan Companies, Inc. (NYSE:MMC), Deere & Company (NYSE:DE), Global Payments Inc (NYSE:GPN), and The Charles Schwab Corporation (NYSE:SCHW). All of these stocks’ market caps resemble KMB’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 52.5 hedge funds with bullish positions and the average amount invested in these stocks was $1651 million. That figure was $1173 million in KMB’s case. Global Payments Inc (NYSE:GPN) is the most popular stock in this table. On the other hand Marsh & McLennan Companies, Inc. (NYSE:MMC) is the least popular one with only 37 bullish hedge fund positions. Kimberly Clark Corporation (NYSE:KMB) 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 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 gained 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately KMB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); KMB investors were disappointed as the stock returned 9.3% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.