Is Kirkland’s, Inc. (KIRK) Worthy of Your Portfolio?

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Kirkland’s, Inc. (NASDAQ:KIRK) shareholders have witnessed a decrease in hedge fund sentiment of late. KIRK was in 11 hedge funds’ portfolios at the end of the third quarter of 2016. There were 12 hedge funds in our database with KIRK positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as HC2 Holdings Inc (NYSEMKT:HCHC), Sterling Construction Company, Inc. (NASDAQ:STRL), and Lifetime Brands Inc (NASDAQ:LCUT) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading Kirkland’s, Inc. (NASDAQ:KIRK)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KIRK over the last 5 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Nokomis Capital, led by Brett Hendrickson, holds the largest position in Kirkland’s, Inc. (NASDAQ:KIRK). Nokomis Capital has a $19 million position in the stock, comprising 4.1% of its 13F portfolio. Sitting at the No. 2 spot is Royce & Associates, led by Chuck Royce, which holds a $17.5 million position. Some other members of the smart money that hold long positions contain Renaissance Technologies, one of the largest hedge funds in the world, Paul Hondros’ AlphaOne Capital Partners and Brandon Osten’s Venator Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Due to the fact that Kirkland’s, Inc. (NASDAQ:KIRK) has encountered bearish sentiment from the smart money, logic holds that there were a few hedge funds that decided to sell off their entire stakes last quarter. It’s worth mentioning that Charles Paquelet’s Skylands Capital cashed in the biggest position of all the hedgies tracked by Insider Monkey, valued at an estimated $0.5 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund cut about $0.3 million worth of shares.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Kirkland’s, Inc. (NASDAQ:KIRK) but similarly valued. These stocks are HC2 Holdings Inc (NYSEMKT:HCHC), Sterling Construction Company, Inc. (NASDAQ:STRL), Lifetime Brands Inc (NASDAQ:LCUT), and Asterias Biotherapeutics Inc (NYSEMKT:AST). This group of stocks’ market caps match KIRK’s market cap.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $55 million in KIRK’s case. HC2 Holdings Inc (NYSEMKT:HCHC) is the most popular stock in this table. On the other hand Lifetime Brands Inc (NASDAQ:LCUT) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Kirkland’s, Inc. (NASDAQ:KIRK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None