Is Kindred Biosciences (KIN) A Good Stock To Buy Now?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Kindred Biosciences Inc (NASDAQ:KIN) changed recently.

Is KIN a good stock to buy now? Kindred Biosciences Inc (NASDAQ:KIN) investors should be aware of a decrease in support from the world’s most elite money managers in recent months. Kindred Biosciences Inc (NASDAQ:KIN) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 12. There were 12 hedge funds in our database with KIN positions at the end of the second quarter. Our calculations also showed that KIN 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.

Today there are plenty of tools stock traders put to use to analyze stocks. Two of the less utilized tools are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outpace the broader indices by a superb margin (see the details here).

John Rogers Ariel Investments

John Rogers of Ariel Investments

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. Now we’re going to take a look at the recent hedge fund action encompassing Kindred Biosciences Inc (NASDAQ:KIN).

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

At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KIN over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Kindred Biosciences Inc (NASDAQ:KIN) was held by Park West Asset Management, which reported holding $28.4 million worth of stock at the end of September. It was followed by Ariel Investments with a $7.2 million position. Other investors bullish on the company included Adage Capital Management, Renaissance Technologies, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Park West Asset Management allocated the biggest weight to Kindred Biosciences Inc (NASDAQ:KIN), around 1.1% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, earmarking 0.11 percent of its 13F equity portfolio to KIN.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Hound Partners. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified KIN as a viable investment and initiated a position in the stock.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Kindred Biosciences Inc (NASDAQ:KIN) but similarly valued. These stocks are GasLog Partners LP (NYSE:GLOP), Earthstone Energy, Inc. (NYSE:ESTE), Team, Inc. (NYSE:TISI), Axcella Health Inc. (NASDAQ:AXLA), Howard Bancorp Inc (NASDAQ:HBMD), Iteris Inc (NASDAQ:ITI), and Centennial Resource Development, Inc. (NASDAQ:CDEV). This group of stocks’ market valuations match KIN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GLOP 5 638 -2
ESTE 3 3571 -3
TISI 15 45652 3
AXLA 3 672 -2
HBMD 4 11065 -1
ITI 11 19098 -2
CDEV 14 20635 -6
Average 7.9 14476 -1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.9 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $51 million in KIN’s case. Team, Inc. (NYSE:TISI) is the most popular stock in this table. On the other hand Earthstone Energy, Inc. (NYSE:ESTE) is the least popular one with only 3 bullish hedge fund positions. Kindred Biosciences Inc (NASDAQ:KIN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KIN is 64.8. 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 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 gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately KIN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on KIN were disappointed as the stock returned -9.8% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Follow Kindred Biosciences Inc. (NASDAQ:KIN)

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