The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards KAR Auction Services Inc (NYSE:KAR).
Is KAR a good stock to buy now? KAR Auction Services Inc (NYSE:KAR) investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. KAR Auction Services Inc (NYSE:KAR) was in 41 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 44. There were 30 hedge funds in our database with KAR positions at the end of the second quarter. Our calculations also showed that KAR 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.
If you’d ask most stock holders, hedge funds are perceived as underperforming, outdated financial vehicles of the past. While there are greater than 8000 funds trading at present, Our researchers choose to focus on the moguls of this group, approximately 850 funds. These money managers preside over bulk of all hedge funds’ total asset base, and by keeping an eye on their matchless equity investments, Insider Monkey has identified several investment strategies that have historically defeated the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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 we’re going to take a glance at the key hedge fund action encompassing KAR Auction Services Inc (NYSE:KAR).
Do Hedge Funds Think KAR Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 37% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KAR over the last 21 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jeffrey Gates’s Gates Capital Management has the number one position in KAR Auction Services Inc (NYSE:KAR), worth close to $82.2 million, comprising 3.6% of its total 13F portfolio. The second most bullish fund manager is Cardinal Capital, led by Amy Minella, holding a $66.1 million position; 2.8% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism encompass Gabriel Plotkin’s Melvin Capital Management, Ken Griffin’s Citadel Investment Group and David Rosen’s Rubric Capital Management. In terms of the portfolio weights assigned to each position One Fin Capital Management allocated the biggest weight to KAR Auction Services Inc (NYSE:KAR), around 5.9% of its 13F portfolio. Southport Management is also relatively very bullish on the stock, dishing out 5.18 percent of its 13F equity portfolio to KAR.
Consequently, specific money managers were breaking ground themselves. Melvin Capital Management, managed by Gabriel Plotkin, established the most valuable position in KAR Auction Services Inc (NYSE:KAR). Melvin Capital Management had $46.1 million invested in the company at the end of the quarter. Jonathan Kolatch’s Redwood Capital Management also initiated a $8.3 million position during the quarter. The other funds with brand new KAR positions are Curtis Schenker and Craig Effron’s Scoggin, Renaissance Technologies, and Lee Ainslie’s Maverick Capital.
Let’s now review hedge fund activity in other stocks similar to KAR Auction Services Inc (NYSE:KAR). These stocks are Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), Methanex Corporation (NASDAQ:MEOH), CareDx, Inc. (NASDAQ:CDNA), Hilltop Holdings Inc. (NYSE:HTH), Cantel Medical Corp. (NYSE:CMD), Corsair Gaming, Inc. (NASDAQ:CRSR), and Akcea Therapeutics, Inc. (NASDAQ:AKCA). This group of stocks’ market valuations are closest to KAR’s market valuation.
|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 20.7 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $321 million in KAR’s case. Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is the most popular stock in this table. On the other hand Corsair Gaming, Inc. (NASDAQ:CRSR) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks KAR Auction Services Inc (NYSE:KAR) is more popular among hedge funds. Our overall hedge fund sentiment score for KAR is 88. 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 returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on KAR as the stock returned 27.3% since the end of September (through 12/14) 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.
Disclosure: None. This article was originally published at Insider Monkey.