We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Kearny Financial Corp. (NASDAQ:KRNY).
Is KRNY a good stock to buy now? Kearny Financial Corp. (NASDAQ:KRNY) has experienced a decrease in enthusiasm from smart money recently. Kearny Financial Corp. (NASDAQ:KRNY) was in 18 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 22. There were 21 hedge funds in our database with KRNY positions at the end of the second quarter. Our calculations also showed that KRNY 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. Keeping this in mind we’re going to take a peek at the fresh hedge fund action surrounding Kearny Financial Corp. (NASDAQ:KRNY).
Do Hedge Funds Think KRNY Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in KRNY a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Kearny Financial Corp. (NASDAQ:KRNY) was held by Renaissance Technologies, which reported holding $42.6 million worth of stock at the end of September. It was followed by Adage Capital Management with a $5 million position. Other investors bullish on the company included Ancora Advisors, Seidman Investment Partnership, and D E Shaw. In terms of the portfolio weights assigned to each position Seidman Investment Partnership allocated the biggest weight to Kearny Financial Corp. (NASDAQ:KRNY), around 6.98% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, dishing out 0.42 percent of its 13F equity portfolio to KRNY.
Judging by the fact that Kearny Financial Corp. (NASDAQ:KRNY) has faced declining sentiment from hedge fund managers, it’s safe to say that there is a sect of hedgies that elected to cut their full holdings last quarter. It’s worth mentioning that Paul Magidson, Jonathan Cohen. And Ostrom Enders’s Castine Capital Management said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, comprising an estimated $6.6 million in stock, and Tim Mullen’s Swift Run Capital Management was right behind this move, as the fund cut about $0.9 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 3 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Kearny Financial Corp. (NASDAQ:KRNY) but similarly valued. These stocks are Bristow Group, Inc. (NYSE:VTOL), Arch Resources, Inc. (NYSE:ARCH), Magic Software Enterprises Ltd. (NASDAQ:MGIC), Winmark Corporation (NASDAQ:WINA), HealthStream, Inc. (NASDAQ:HSTM), Petmed Express Inc (NASDAQ:PETS), and Sinovac Biotech Ltd. (NASDAQ:SVA). All of these stocks’ market caps match KRNY’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 $104 million. That figure was $75 million in KRNY’s case. Arch Resources, Inc. (NYSE:ARCH) is the most popular stock in this table. On the other hand Sinovac Biotech Ltd. (NASDAQ:SVA) is the least popular one with only 3 bullish hedge fund positions. Kearny Financial Corp. (NASDAQ:KRNY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KRNY is 59.2. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on KRNY as the stock returned 45.7% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.