We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Kirby Corporation (NYSE:KEX).
Is KEX a good stock to buy? Kirby Corporation (NYSE:KEX) was in 34 hedge funds’ portfolios at the end of September. The all time high for this statistic is 29. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. KEX has seen an increase in enthusiasm from smart money recently. There were 20 hedge funds in our database with KEX holdings at the end of June. Our calculations also showed that KEX 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.
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 66 percentage points since March 2017 (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.
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. With all of this in mind we’re going to take a look at the new hedge fund action surrounding Kirby Corporation (NYSE:KEX).
Do Hedge Funds Think KEX Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 70% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KEX over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Diamond Hill Capital held the most valuable stake in Kirby Corporation (NYSE:KEX), which was worth $123.8 million at the end of the third quarter. On the second spot was Hound Partners which amassed $88.3 million worth of shares. Slate Path Capital, D E Shaw, and StackLine Partners 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 StackLine Partners allocated the biggest weight to Kirby Corporation (NYSE:KEX), around 9.68% of its 13F portfolio. Hound Partners is also relatively very bullish on the stock, earmarking 5.98 percent of its 13F equity portfolio to KEX.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Select Equity Group, managed by Robert Joseph Caruso, established the most valuable position in Kirby Corporation (NYSE:KEX). Select Equity Group had $17.4 million invested in the company at the end of the quarter. Jim Simons (founder)’s Renaissance Technologies also made a $10.4 million investment in the stock during the quarter. The other funds with brand new KEX positions are David Rosen’s Rubric Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s go over hedge fund activity in other stocks similar to Kirby Corporation (NYSE:KEX). We will take a look at Alcoa Corporation (NYSE:AA), Utz Brands Inc (NYSE:UTZ), Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY), Federated Hermes, Inc. (NYSE:FHI), Guangshen Railway Co. Ltd (NYSE:GSH), PagerDuty, Inc. (NYSE:PD), and Greif, Inc. (NYSE:GEF). This group of stocks’ market values match KEX’s market value.
|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 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $168 million. That figure was $424 million in KEX’s case. Alcoa Corporation (NYSE:AA) is the most popular stock in this table. On the other hand Guangshen Railway Co. Ltd (NYSE:GSH) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Kirby Corporation (NYSE:KEX) is more popular among hedge funds. Our overall hedge fund sentiment score for KEX is 90. 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 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on KEX as the stock returned 38.5% since the end of September (through 12/18) 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.