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Is Kontoor Brands, Inc. (KTB) A Good Stock To Buy?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Kontoor Brands, Inc. (NASDAQ:KTB).

Kontoor Brands, Inc. (NASDAQ:KTB) shareholders have witnessed an increase in hedge fund sentiment recently. Our calculations also showed that KTB isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 S&P 500 ETFs by 58 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.

Kerr Neilson of Platinum Asset Management

 

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding Kontoor Brands, Inc. (NASDAQ:KTB).

Hedge fund activity in Kontoor Brands, Inc. (NASDAQ:KTB)

At Q1’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in KTB a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is KTB A Good Stock To Buy?

More specifically, D E Shaw was the largest shareholder of Kontoor Brands, Inc. (NASDAQ:KTB), with a stake worth $8.8 million reported as of the end of September. Trailing D E Shaw was Arrowstreet Capital, which amassed a stake valued at $6.5 million. Millennium Management, Platinum Asset Management, and Winton Capital Management 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 Weld Capital Management allocated the biggest weight to Kontoor Brands, Inc. (NASDAQ:KTB), around 0.25% of its 13F portfolio. TwinBeech Capital is also relatively very bullish on the stock, earmarking 0.17 percent of its 13F equity portfolio to KTB.

As one would reasonably expect, some big names were leading the bulls’ herd. Engineers Gate Manager, managed by Greg Eisner, created the most valuable position in Kontoor Brands, Inc. (NASDAQ:KTB). Engineers Gate Manager had $0.6 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Minhua Zhang’s Weld Capital Management and Jinghua Yan’s TwinBeech Capital.

Let’s now review hedge fund activity in other stocks similar to Kontoor Brands, Inc. (NASDAQ:KTB). We will take a look at Banco Macro SA (NYSE:BMA), Deluxe Corporation (NYSE:DLX), BancFirst Corporation (NASDAQ:BANF), and Dril-Quip, Inc. (NYSE:DRQ). All of these stocks’ market caps are similar to KTB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BMA 8 55211 1
DLX 15 63014 -14
BANF 12 29557 6
DRQ 13 82214 -8
Average 12 57499 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $33 million in KTB’s case. Deluxe Corporation (NYSE:DLX) is the most popular stock in this table. On the other hand Banco Macro SA (NYSE:BMA) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Kontoor Brands, Inc. (NASDAQ:KTB) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. Unfortunately KTB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on KTB were disappointed as the stock returned -10.1% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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