Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards KeyCorp (NYSE:KEY) to find out whether there were any major changes in hedge funds’ views.
Is KEY a good stock to buy? KeyCorp (NYSE:KEY) investors should be aware of a decrease in support from the world’s most elite money managers of late. KeyCorp (NYSE:KEY) was in 36 hedge funds’ portfolios at the end of September. The all time high for this statistic is 46. There were 40 hedge funds in our database with KEY positions at the end of the second quarter. Our calculations also showed that KEY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Sander Gerber of Hudson Bay Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a look at the latest hedge fund action surrounding KeyCorp (NYSE:KEY).
Do Hedge Funds Think KEY Is A Good Stock To Buy Now?
At the end of September, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position in KEY a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Balyasny Asset Management held the most valuable stake in KeyCorp (NYSE:KEY), which was worth $128.2 million at the end of the third quarter. On the second spot was Pzena Investment Management which amassed $64.2 million worth of shares. Adage Capital Management, Citadel Investment Group, and Prospector 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 Prospector Partners allocated the biggest weight to KeyCorp (NYSE:KEY), around 2.56% of its 13F portfolio. Full18 Capital is also relatively very bullish on the stock, earmarking 1.86 percent of its 13F equity portfolio to KEY.
Because KeyCorp (NYSE:KEY) has faced falling interest from hedge fund managers, it’s safe to say that there were a few money managers that slashed their full holdings in the third quarter. It’s worth mentioning that Brandon Haley’s Holocene Advisors sold off the largest stake of the 750 funds tracked by Insider Monkey, valued at close to $36.7 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund said goodbye to about $14.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 4 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to KeyCorp (NYSE:KEY). We will take a look at Fresenius Medical Care AG & Co. (NYSE:FMS), Baker Hughes Company (NYSE:BKR), W.W. Grainger, Inc. (NYSE:GWW), Live Nation Entertainment, Inc. (NYSE:LYV), Ingersoll Rand Inc. (NYSE:IR), Steris Plc (NYSE:STE), and The Cooper Companies, Inc. (NYSE:COO). This group of stocks’ market caps match KEY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FMS | 4 | 231694 | -1 |
| BKR | 37 | 1013933 | -3 |
| GWW | 28 | 306060 | -1 |
| LYV | 47 | 1308167 | 7 |
| IR | 33 | 732834 | 2 |
| STE | 34 | 1733011 | -1 |
| COO | 37 | 1403322 | 4 |
| Average | 31.4 | 961289 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $961 million. That figure was $399 million in KEY’s case. Live Nation Entertainment, Inc. (NYSE:LYV) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. (NYSE:FMS) is the least popular one with only 4 bullish hedge fund positions. KeyCorp (NYSE:KEY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KEY is 61.7. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately KEY wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on KEY were disappointed as the stock returned 4.7% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
