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Is KVH Industries, Inc. (KVHI) Going to Burn These Hedge Funds?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded KVH Industries, Inc. (NASDAQ:KVHI) based on those filings.

Is KVH Industries, Inc. (NASDAQ:KVHI) a bargain? Prominent investors are getting more optimistic. The number of long hedge fund bets increased by 1 lately. Our calculations also showed that KVHI 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

RENAISSANCE TECHNOLOGIES

Jim Simons of Renaissance Technologies

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the key hedge fund action regarding KVH Industries, Inc. (NASDAQ:KVHI).

How are hedge funds trading KVH Industries, Inc. (NASDAQ:KVHI)?

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards KVHI over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Is KVHI A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey,  Renaissance Technologies has the most valuable position in KVH Industries, Inc. (NASDAQ:KVHI), worth close to $4.1 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Portolan Capital Management, managed by George McCabe, which holds a $3.9 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish include Brian Ashford-Russell and Tim Woolley’s Polar Capital, David Harding’s Winton Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Portolan Capital Management allocated the biggest weight to KVH Industries, Inc. (NASDAQ:KVHI), around 0.59% of its 13F portfolio. Polar Capital is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to KVHI.

Consequently, some big names were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, established the most outsized position in KVH Industries, Inc. (NASDAQ:KVHI). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as KVH Industries, Inc. (NASDAQ:KVHI) but similarly valued. We will take a look at Northern Dynasty Minerals Ltd. (NYSE:NAK), Provident Bancorp, Inc. (NASDAQ:PVBC), Chuy’s Holdings Inc (NASDAQ:CHUY), and X Financial (NYSE:XYF). This group of stocks’ market caps are similar to KVHI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NAK 5 7362 -1
PVBC 6 5603 -2
CHUY 10 14149 1
XYF 2 415 -1
Average 5.75 6882 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $10 million in KVHI’s case. Chuy’s Holdings Inc (NASDAQ:CHUY) is the most popular stock in this table. On the other hand X Financial (NYSE:XYF) is the least popular one with only 2 bullish hedge fund positions. KVH Industries, Inc. (NASDAQ:KVHI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately KVHI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on KVHI were disappointed as the stock returned -4.5% during the same time period 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 many of these stocks already outperformed the market so far this year.

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