In this article we are going to use hedge fund sentiment as a tool and determine whether Kaman Corporation (NYSE:KAMN) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is KAMN a good stock to buy now? KAMN investors should be aware of a decrease in hedge fund sentiment recently. Kaman Corporation (NYSE:KAMN) was in 12 hedge funds’ portfolios at the end of September. The all time high for this statistics is 22. There were 13 hedge funds in our database with KAMN positions at the end of the second quarter. Our calculations also showed that KAMN isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a gander at the latest hedge fund action surrounding Kaman Corporation (NYSE:KAMN).
Do Hedge Funds Think KAMN Is A Good Stock To Buy Now?
At third quarter’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KAMN over the last 21 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, GAMCO Investors was the largest shareholder of Kaman Corporation (NYSE:KAMN), with a stake worth $84.4 million reported as of the end of September. Trailing GAMCO Investors was Cardinal Capital, which amassed a stake valued at $43.2 million. Arrowstreet Capital, Millennium 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 Cardinal Capital allocated the biggest weight to Kaman Corporation (NYSE:KAMN), around 1.8% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, setting aside 0.94 percent of its 13F equity portfolio to KAMN.
Since Kaman Corporation (NYSE:KAMN) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there were a few fund managers that decided to sell off their positions entirely by the end of the third quarter. Intriguingly, John Murphy’s Levin Easterly Partners dropped the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at close to $0.8 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also sold off its stock, about $0.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Kaman Corporation (NYSE:KAMN). These stocks are NextPoint Residential Trust Inc (NYSE:NXRT), Deluxe Corporation (NYSE:DLX), Atkore International Group Inc. (NYSE:ATKR), Karyopharm Therapeutics Inc (NASDAQ:KPTI), PC Connection, Inc. (NASDAQ:CNXN), Micro Focus Intl PLC (NYSE:MFGP), and Sturm, Ruger & Company (NYSE:RGR). All of these stocks’ market caps resemble KAMN’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 15 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $138 million in KAMN’s case. Sturm, Ruger & Company (NYSE:RGR) is the most popular stock in this table. On the other hand PC Connection, Inc. (NASDAQ:CNXN) is the least popular one with only 4 bullish hedge fund positions. Kaman Corporation (NYSE:KAMN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KAMN is 40.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on KAMN as the stock returned 47.1% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.