Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first quarter, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first quarter still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to KKR & Co Inc. (NYSE:KKR) changed recently.
Is KKR & Co Inc. (NYSE:KKR) a marvelous investment now? The smart money is getting more bullish. The number of bullish hedge fund bets rose by 1 recently. Our calculations also showed that kkr isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a glance at the recent hedge fund action regarding KKR & Co Inc. (NYSE:KKR).
How have hedgies been trading KKR & Co Inc. (NYSE:KKR)?
At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in KKR a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Jeffrey Ubben’s ValueAct Capital has the largest position in KKR & Co Inc. (NYSE:KKR), worth close to $1.1909 billion, accounting for 13.1% of its total 13F portfolio. On ValueAct Capital’s heels is Charles Akre of Akre Capital Management, with a $299.6 million position; 3.2% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions consist of John Armitage’s Egerton Capital Limited, Richard S. Pzena’s Pzena Investment Management and John W. Rogers’s Ariel Investments.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Diamond Hill Capital, managed by Ric Dillon, assembled the most valuable position in KKR & Co Inc. (NYSE:KKR). Diamond Hill Capital had $113.2 million invested in the company at the end of the quarter. Michael Blitzer’s Kingstown Capital Management also made a $11.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Brian Gaines’s Springhouse Capital Management, Louis Bacon’s Moore Global Investments, and Curtis Schenker and Craig Effron’s Scoggin.
Let’s check out hedge fund activity in other stocks similar to KKR & Co Inc. (NYSE:KKR). These stocks are Discovery Inc. (NASDAQ:DISCA), Discovery Inc. (NASDAQ:DISCK), KLA-Tencor Corporation (NASDAQ:KLAC), and Fifth Third Bancorp (NASDAQ:FITB). All of these stocks’ market caps are similar to KKR’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 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $698 million. That figure was $2527 million in KKR’s case. KLA-Tencor Corporation (NASDAQ:KLAC) is the most popular stock in this table. On the other hand Discovery Inc. (NASDAQ:DISCA) is the least popular one with only 26 bullish hedge fund positions. KKR & Co Inc. (NYSE:KKR) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on KKR, though not to the same extent, as the stock returned 0.1% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.