Is KBR, Inc. (NYSE:KBR) a buy, sell, or hold? The smart money is getting less bullish. The number of long hedge fund positions fell by 14 in recent months.
In the eyes of most stock holders, hedge funds are seen as slow, outdated investment tools of years past. While there are greater than 8000 funds with their doors open at the moment, we at Insider Monkey look at the crème de la crème of this group, close to 450 funds. Most estimates calculate that this group has its hands on the majority of all hedge funds’ total capital, and by monitoring their best equity investments, we have formulated a few investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).
Just as integral, bullish insider trading sentiment is a second way to parse down the stock market universe. As the old adage goes: there are a number of motivations for a corporate insider to downsize shares of his or her company, but only one, very obvious reason why they would buy. Various academic studies have demonstrated the market-beating potential of this strategy if investors know where to look (learn more here).
Now, it’s important to take a look at the latest action regarding KBR, Inc. (NYSE:KBR).
How have hedgies been trading KBR, Inc. (NYSE:KBR)?
At the end of the fourth quarter, a total of 14 of the hedge funds we track held long positions in this stock, a change of -50% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly.
When looking at the hedgies we track, East Side Capital (RR Partners), managed by Steven Richman, holds the biggest position in KBR, Inc. (NYSE:KBR). East Side Capital (RR Partners) has a $115 million position in the stock, comprising 6.5% of its 13F portfolio. On East Side Capital (RR Partners)’s heels is Platinum Asset Management, managed by Kerr Neilson, which held a $76 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Some other hedge funds that hold long positions include Cliff Asness’s AQR Capital Management, Chuck Royce’s Royce & Associates and John Overdeck and David Siegel’s Two Sigma Advisors.
Judging by the fact that KBR, Inc. (NYSE:KBR) has experienced bearish sentiment from the smart money, logic holds that there was a specific group of hedgies who sold off their full holdings in Q4. It’s worth mentioning that Steven Cohen’s SAC Capital Advisors sold off the largest position of all the hedgies we monitor, worth about $33 million in stock., and Malcolm Fairbairn of Ascend Capital was right behind this move, as the fund dumped about $16 million worth. These transactions are interesting, as total hedge fund interest was cut by 14 funds in Q4.
How have insiders been trading KBR, Inc. (NYSE:KBR)?
Insider buying is particularly usable when the company we’re looking at has seen transactions within the past six months. Over the latest half-year time frame, KBR, Inc. (NYSE:KBR) has experienced zero unique insiders purchasing, and 2 insider sales (see the details of insider trades here).
Let’s go over hedge fund and insider activity in other stocks similar to KBR, Inc. (NYSE:KBR). These stocks are SAIC, Inc. (NYSE:SAI), URS Corp (NYSE:URS), AECOM Technology Corp (NYSE:ACM), The Shaw Group Inc. (NYSE:SHAW), and Jacobs Engineering Group Inc (NYSE:JEC). This group of stocks are in the technical services industry and their market caps resemble KBR’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|SAIC, Inc. (NYSE:SAI)||18||0||0|
|URS Corp (NYSE:URS)||17||0||5|
|AECOM Technology Corp (NYSE:ACM)||11||0||11|
|The Shaw Group Inc. (NYSE:SHAW)||25||0||8|
|Jacobs Engineering Group Inc (NYSE:JEC)||20||0||3|
With the results shown by our time-tested strategies, retail investors should always watch hedge fund and insider trading activity, and KBR, Inc. (NYSE:KBR) applies perfectly to this mantra.
Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.