In this article you are going to find out whether hedge funds think KBL Merger Corp. IV (NASDAQ:KBLM) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Hedge fund interest in KBL Merger Corp. IV (NASDAQ:KBLM) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare KBLM to other stocks including Aviat Networks Inc (NASDAQ:AVNW), Ring Energy Inc (NYSE:REI), and Elevate Credit, Inc. (NYSE:ELVT) to get a better sense of its popularity.
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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 monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Glazer of Glazer Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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 take a gander at the fresh hedge fund action encompassing KBL Merger Corp. IV (NASDAQ:KBLM).
How have hedgies been trading KBL Merger Corp. IV (NASDAQ:KBLM)?
At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in KBLM a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Glazer Capital, managed by Paul Glazer, holds the most valuable position in KBL Merger Corp. IV (NASDAQ:KBLM). Glazer Capital has a $0.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Hudson Bay Capital Management, led by Sander Gerber, holding a $0.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions consist of Phillip Goldstein, Andrew Dakos and Steven Samuels’s Bulldog Investors, Sander Gerber’s Hudson Bay Capital Management and Michael Platt and William Reeves’s BlueCrest Capital Mgmt.. In terms of the portfolio weights assigned to each position Bulldog Investors allocated the biggest weight to KBL Merger Corp. IV (NASDAQ:KBLM), around 0.02% of its 13F portfolio. Bulldog Investors is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to KBLM.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks similar to KBL Merger Corp. IV (NASDAQ:KBLM). We will take a look at Aviat Networks Inc (NASDAQ:AVNW), Ring Energy Inc (NYSE:REI), Elevate Credit, Inc. (NYSE:ELVT), and Performant Financial Corp (NASDAQ:PFMT). All of these stocks’ market caps are closest to KBLM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AVNW | 5 | 9875 | 0 |
| REI | 6 | 596 | -4 |
| ELVT | 12 | 3291 | 1 |
| PFMT | 3 | 12188 | -1 |
| Average | 6.5 | 6488 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $0 million in KBLM’s case. Elevate Credit, Inc. (NYSE:ELVT) is the most popular stock in this table. On the other hand Performant Financial Corp (NASDAQ:PFMT) is the least popular one with only 3 bullish hedge fund positions. KBL Merger Corp. IV (NASDAQ:KBLM) 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately KBLM wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); KBLM investors were disappointed as the stock returned 2.7% 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.
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Disclosure: None. This article was originally published at Insider Monkey.