Is Kennedy-Wilson Holdings Inc (KW) A Good Stock To Buy ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Kennedy-Wilson Holdings Inc (NYSE:KW).

Kennedy-Wilson Holdings Inc (NYSE:KW) was in 13 hedge funds’ portfolios at the end of the second quarter of 2019. KW has experienced a decrease in activity from the world’s largest hedge funds of late. There were 14 hedge funds in our database with KW holdings at the end of the previous quarter. Our calculations also showed that KW isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Prem Watsa, Fairfax Financial Holdings

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s analyze the fresh hedge fund action regarding Kennedy-Wilson Holdings Inc (NYSE:KW).

What does smart money think about Kennedy-Wilson Holdings Inc (NYSE:KW)?

At Q2’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KW over the last 16 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).


According to Insider Monkey’s hedge fund database, Fairfax Financial Holdings, managed by Prem Watsa, holds the largest position in Kennedy-Wilson Holdings Inc (NYSE:KW). Fairfax Financial Holdings has a $273.5 million position in the stock, comprising 11.9% of its 13F portfolio. Sitting at the No. 2 spot is Elkhorn Partners, led by Alan S. Parsow, holding a $89.7 million position; 53.5% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions comprise Chuck Royce’s Royce & Associates, Eric Sprott’s Sprott Asset Management and Richard S. Meisenberg’s ACK Asset Management.

Due to the fact that Kennedy-Wilson Holdings Inc (NYSE:KW) has faced falling interest from hedge fund managers, it’s easy to see that there were a few hedgies who were dropping their positions entirely last quarter. It’s worth mentioning that Jeffrey Talpins’s Element Capital Management cut the biggest investment of the 750 funds tracked by Insider Monkey, worth an estimated $0.3 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Kennedy-Wilson Holdings Inc (NYSE:KW) but similarly valued. We will take a look at EnerSys (NYSE:ENS), Barnes Group Inc. (NYSE:B), Altair Engineering Inc. (NASDAQ:ALTR), and Hilton Grand Vacations Inc. (NYSE:HGV). This group of stocks’ market caps are similar to KW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ENS 16 78159 -4
B 15 56949 -3
ALTR 14 81367 -4
HGV 37 959432 0
Average 20.5 293977 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $294 million. That figure was $468 million in KW’s case. Hilton Grand Vacations Inc. (NYSE:HGV) is the most popular stock in this table. On the other hand Altair Engineering Inc. (NASDAQ:ALTR) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Kennedy-Wilson Holdings Inc (NYSE:KW) is even less popular than ALTR. Hedge funds clearly dropped the ball on KW as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on KW as the stock returned 7.6% during the third quarter and outperformed the market by an even larger margin.

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