Here is What Hedge Funds Think About Kohl’s Corporation (KSS)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Kohl’s Corporation (NYSE:KSS).

Is Kohl’s Corporation (NYSE:KSS) the right pick for your portfolio? The smart money was cutting their exposure. The number of bullish hedge fund bets dropped by 3 recently. Kohl’s Corporation (NYSE:KSS) was in 37 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 42. Our calculations also showed that KSS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a look at the recent hedge fund action regarding Kohl’s Corporation (NYSE:KSS).

Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

Do Hedge Funds Think KSS Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in KSS over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Arrowstreet Capital held the most valuable stake in Kohl’s Corporation (NYSE:KSS), which was worth $199.8 million at the end of the third quarter. On the second spot was Ancora Advisors which amassed $167.6 million worth of shares. Two Sigma Advisors, Dorsal Capital Management, and Appaloosa Management LP 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 Legion Partners Asset Management allocated the biggest weight to Kohl’s Corporation (NYSE:KSS), around 11.02% of its 13F portfolio. Engine Capital is also relatively very bullish on the stock, setting aside 6.61 percent of its 13F equity portfolio to KSS.

Because Kohl’s Corporation (NYSE:KSS) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there was a specific group of hedgies who were dropping their entire stakes by the end of the third quarter. Intriguingly, Anand Parekh’s Alyeska Investment Group dropped the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising close to $31.8 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund dropped about $29.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Kohl’s Corporation (NYSE:KSS). We will take a look at Pilgrim’s Pride Corporation (NASDAQ:PPC), Old Republic International Corporation (NYSE:ORI), Starwood Property Trust, Inc. (NYSE:STWD), PLDT Inc. (NYSE:PHI), Choice Hotels International, Inc. (NYSE:CHH), Synaptics Incorporated (NASDAQ:SYNA), and Oshkosh Corporation (NYSE:OSK). This group of stocks’ market caps are similar to KSS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PPC 25 254968 7
ORI 20 357593 -6
STWD 12 161117 1
PHI 5 104426 0
CHH 17 151994 2
SYNA 23 493437 -4
OSK 31 263682 3
Average 19 255317 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $951 million in KSS’s case. Oshkosh Corporation (NYSE:OSK) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Kohl’s Corporation (NYSE:KSS) is more popular among hedge funds. Our overall hedge fund sentiment score for KSS is 78.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 28.6% in 2021 through November 30th but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on KSS as the stock returned 8.8% since the end of September (through 11/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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