Is Kite Realty Group Trust (KRG) A Good Stock To Buy ?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Kite Realty Group Trust (NYSE:KRG) to find out whether it was one of their high conviction long-term ideas.

Kite Realty Group Trust (NYSE:KRG) was in 7 hedge funds’ portfolios at the end of December. KRG has experienced a decrease in hedge fund interest lately. There were 13 hedge funds in our database with KRG positions at the end of the previous quarter. Our calculations also showed that krg isn’t among the 30 most popular stocks among hedge funds.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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.

Chuck Royce

We’re going to view the latest hedge fund action surrounding Kite Realty Group Trust (NYSE:KRG).

Hedge fund activity in Kite Realty Group Trust (NYSE:KRG)

Heading into the first quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -46% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KRG over the last 14 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with KRG Positions

More specifically, Renaissance Technologies was the largest shareholder of Kite Realty Group Trust (NYSE:KRG), with a stake worth $18.8 million reported as of the end of December. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $1.9 million. Royce & Associates, Two Sigma Advisors, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that Kite Realty Group Trust (NYSE:KRG) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few hedgies that elected to cut their entire stakes by the end of the third quarter. Interestingly, Noam Gottesman’s GLG Partners said goodbye to the largest stake of all the hedgies followed by Insider Monkey, worth an estimated $7.5 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $3.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 6 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Kite Realty Group Trust (NYSE:KRG). These stocks are AtriCure Inc. (NASDAQ:ATRC), Kinsale Capital Group, Inc. (NASDAQ:KNSL), TransAlta Corporation (NYSE:TAC), and IMAX Corporation (NYSE:IMAX). This group of stocks’ market caps are closest to KRG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ATRC 22 163677 0
KNSL 12 19430 7
TAC 9 12805 0
IMAX 14 28137 0
Average 14.25 56012 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $25 million in KRG’s case. AtriCure Inc. (NASDAQ:ATRC) is the most popular stock in this table. On the other hand TransAlta Corporation (NYSE:TAC) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Kite Realty Group Trust (NYSE:KRG) is even less popular than TAC. Hedge funds dodged a bullet by taking a bearish stance towards KRG. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately KRG wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); KRG investors were disappointed as the stock returned 13% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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