Is KBR Stock A Buy or Sell?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 887 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2020. In this article we are going to take a look at smart money sentiment towards KBR, Inc. (NYSE:KBR).

Is KBR stock a buy? Investors who are in the know were getting less optimistic. The number of long hedge fund positions shrunk by 9 in recent months. KBR, Inc. (NYSE:KBR) was in 29 hedge funds’ portfolios at the end of December. The all time high for this statistic is 38. Our calculations also showed that KBR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 38 hedge funds in our database with KBR holdings at the end of September.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Now let’s analyze the new hedge fund action surrounding KBR, Inc. (NYSE:KBR).

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

At Q4’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from one quarter earlier. By comparison, 29 hedge funds held shares or bullish call options in KBR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Sachem Head Capital was the largest shareholder of KBR, Inc. (NYSE:KBR), with a stake worth $122.2 million reported as of the end of December. Trailing Sachem Head Capital was Permian Investment Partners, which amassed a stake valued at $107.4 million. Suvretta Capital Management, Scopia Capital, and Millennium Management 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 Permian Investment Partners allocated the biggest weight to KBR, Inc. (NYSE:KBR), around 16.07% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, earmarking 12.47 percent of its 13F equity portfolio to KBR.

Due to the fact that KBR, Inc. (NYSE:KBR) has faced declining sentiment from hedge fund managers, it’s easy to see that there were a few funds who sold off their entire stakes in the fourth quarter. It’s worth mentioning that Nathaniel August’s Mangrove Partners cut the largest position of the 750 funds watched by Insider Monkey, valued at close to $14.6 million in stock. David Rosen’s fund, Rubric Capital Management, also sold off its stock, about $13.8 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 9 funds in the fourth quarter.

Let’s go over hedge fund activity in other stocks similar to KBR, Inc. (NYSE:KBR). These stocks are CMC Materials, Inc. (NASDAQ:CCMP), Glacier Bancorp, Inc. (NASDAQ:GBCI), GoHealth, Inc. (NASDAQ:GOCO), Element Solutions Inc. (NYSE:ESI), Navistar International Corp (NYSE:NAV), J2 Global Inc (NASDAQ:JCOM), and Editas Medicine, Inc. (NASDAQ:EDIT). This group of stocks’ market caps are closest to KBR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $684 million. That figure was $831 million in KBR’s case. Element Solutions Inc. (NYSE:ESI) is the most popular stock in this table. On the other hand Glacier Bancorp, Inc. (NASDAQ:GBCI) is the least popular one with only 11 bullish hedge fund positions. KBR, Inc. (NYSE:KBR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KBR is 68.9. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on KBR as the stock returned 26.4% since the end of Q4 (through 4/12) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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