Is KKR A Good Stock To Buy Now?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about KKR & Co Inc. (NYSE:KKR) in this article.

Is KKR a good stock to buy now? KKR & Co Inc. (NYSE:KKR) was in 50 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 56. KKR shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. There were 45 hedge funds in our database with KKR holdings at the end of June. Our calculations also showed that KKR 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Charles Akre of Akre Capital Management

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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 let’s go over the recent hedge fund action regarding KKR & Co Inc. (NYSE:KKR).

Hedge fund activity in KKR & Co Inc. (NYSE:KKR)

At the end of the third quarter, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the second quarter of 2020. On the other hand, there were a total of 43 hedge funds with a bullish position in KKR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is KKR A Good Stock To Buy?

The largest stake in KKR & Co Inc. (NYSE:KKR) was held by ValueAct Capital, which reported holding $1545.3 million worth of stock at the end of September. It was followed by Akre Capital Management with a $505.7 million position. Other investors bullish on the company included Diamond Hill Capital, Egerton Capital Limited, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Blacksheep Fund Management allocated the biggest weight to KKR & Co Inc. (NYSE:KKR), around 22.1% of its 13F portfolio. ValueAct Capital is also relatively very bullish on the stock, designating 21.74 percent of its 13F equity portfolio to KKR.

As aggregate interest increased, specific money managers have jumped into KKR & Co Inc. (NYSE:KKR) headfirst. Holocene Advisors, managed by Brandon Haley, initiated the biggest position in KKR & Co Inc. (NYSE:KKR). Holocene Advisors had $34.9 million invested in the company at the end of the quarter. Highbridge Capital Management also initiated a $14.5 million position during the quarter. The following funds were also among the new KKR investors: Noam Gottesman’s GLG Partners, Andrew Weiss’s Weiss Asset Management, and Daniel Johnson’s Gillson Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as KKR & Co Inc. (NYSE:KKR) but similarly valued. We will take a look at W.W. Grainger, Inc. (NYSE:GWW), Equity Residential (NYSE:EQR), Marathon Petroleum Corp (NYSE:MPC), Fortinet Inc (NASDAQ:FTNT), Equifax Inc. (NYSE:EFX), Fortis Inc. (NYSE:FTS), and Canadian Natural Resources Limited (NYSE:CNQ). This group of stocks’ market caps match KKR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GWW 28 391187 0
EQR 27 526296 -6
MPC 56 1071467 -6
FTNT 36 1291884 -8
EFX 42 1266273 14
FTS 8 411986 0
CNQ 30 233173 2
Average 32.4 741752 -0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.4 hedge funds with bullish positions and the average amount invested in these stocks was $742 million. That figure was $3657 million in KKR’s case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 8 bullish hedge fund positions. KKR & Co Inc. (NYSE:KKR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KKR is 80.5. 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 gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on KKR as the stock returned 14.6% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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