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KeyCorp (KEY): A Rare Banking Stock Hedge Funds Piling Into

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of KeyCorp (NYSE:KEY) based on that data.

Is KeyCorp (NYSE:KEY) an outstanding investment right now? Investors who are in the know are getting more optimistic. The number of bullish hedge fund positions advanced by 7 lately. Our calculations also showed that KEY 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.

In the 21st century investor’s toolkit there are a large number of indicators stock traders employ to size up publicly traded companies. A couple of the most underrated indicators are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can trounce the market by a significant amount (see the details here).

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. 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. Now we’re going to analyze the key hedge fund action encompassing KeyCorp (NYSE:KEY).

What does smart money think about KeyCorp (NYSE:KEY)?

At Q1’s end, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KEY over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

The largest stake in KeyCorp (NYSE:KEY) was held by Pzena Investment Management, which reported holding $82.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $70.7 million position. Other investors bullish on the company included Adage Capital Management, Carlson Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Elizabeth Park Capital Management allocated the biggest weight to KeyCorp (NYSE:KEY), around 3.24% of its 13F portfolio. Fourthstone LLC is also relatively very bullish on the stock, dishing out 1.33 percent of its 13F equity portfolio to KEY.

Now, key hedge funds have been driving this bullishness. Carlson Capital, managed by Clint Carlson, created the most valuable position in KeyCorp (NYSE:KEY). Carlson Capital had $35.3 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $8.2 million position during the quarter. The following funds were also among the new KEY investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Steve Cohen’s Point72 Asset Management, and Phil Stone’s Fourthstone LLC.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as KeyCorp (NYSE:KEY) but similarly valued. We will take a look at HEICO Corporation (NYSE:HEI), TELUS Corporation (NYSE:TU), Ulta Beauty, Inc. (NASDAQ:ULTA), and The Liberty SiriusXM Group (NASDAQ:LSXMA). This group of stocks’ market valuations match KEY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HEI 39 602163 -18
TU 15 197962 2
ULTA 46 925549 5
LSXMA 48 1087620 -2
Average 37 703324 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $703 million. That figure was $349 million in KEY’s case. The Liberty SiriusXM Group (NASDAQ:LSXMA) is the most popular stock in this table. On the other hand TELUS Corporation (NYSE:TU) is the least popular one with only 15 bullish hedge fund positions. KeyCorp (NYSE:KEY) 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately KEY wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on KEY were disappointed as the stock returned 14.3% 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.