In this article we will take a look at whether hedge funds think Korn Ferry (NYSE:KFY) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is KFY a good stock to buy now? Korn Ferry (NYSE:KFY) has seen a decrease in support from the world’s most elite money managers of late. Korn Ferry (NYSE:KFY) was in 21 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 28. There were 28 hedge funds in our database with KFY positions at the end of the second quarter. Our calculations also showed that KFY 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind we’re going to go over the latest hedge fund action surrounding Korn Ferry (NYSE:KFY).
Do Hedge Funds Think KFY Is A Good Stock To Buy Now?
At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in KFY over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, Paradice Investment Management held the most valuable stake in Korn Ferry (NYSE:KFY), which was worth $31.1 million at the end of the third quarter. On the second spot was Lakewood Capital Management which amassed $24.2 million worth of shares. Ariel Investments, Royce & Associates, and Kerrisdale Capital 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 Stadium Capital Management allocated the biggest weight to Korn Ferry (NYSE:KFY), around 5.3% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, designating 2.25 percent of its 13F equity portfolio to KFY.
Due to the fact that Korn Ferry (NYSE:KFY) has experienced bearish sentiment from hedge fund managers, we can see that there were a few money managers that decided to sell off their positions entirely in the third quarter. At the top of the heap, Steven Boyd’s Armistice Capital dumped the largest investment of all the hedgies tracked by Insider Monkey, worth about $21.9 million in stock, and Greg Poole’s Echo Street Capital Management was right behind this move, as the fund said goodbye to about $8.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 7 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Korn Ferry (NYSE:KFY) but similarly valued. These stocks are MakeMyTrip Limited (NASDAQ:MMYT), Liberty Latin America Ltd. (NASDAQ:LILA), Ameris Bancorp (NASDAQ:ABCB), Omega Flex, Inc. (NASDAQ:OFLX), NetScout Systems, Inc. (NASDAQ:NTCT), Washington Federal Inc. (NASDAQ:WAFD), and AssetMark Financial Holdings, Inc. (NYSE:AMK). This group of stocks’ market valuations are similar to KFY’s market valuation.
|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 11.6 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $156 million in KFY’s case. Liberty Latin America Ltd. (NASDAQ:LILA) is the most popular stock in this table. On the other hand Omega Flex, Inc. (NASDAQ:OFLX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Korn Ferry (NYSE:KFY) is more popular among hedge funds. Our overall hedge fund sentiment score for KFY is 70.5. 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 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on KFY as the stock returned 36.9% since the end of September (through 12/14) 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.
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Disclosure: None. This article was originally published at Insider Monkey.