Kimberly-Clark Corporation (KMB): Hedge Funds In Wait-and-See Mode

Does Kimberly-Clark Corporation (NYSE:KMB) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Hedge fund interest in Kimberly-Clark Corporation (NYSE:KMB) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Waste Management, Inc. (NYSE:WM), American International Group Inc (NYSE:AIG), and TC Energy Corporation (NYSE:TRP) to gather more data points. Our calculations also showed that KMB isn’t among the 30 most popular stocks among hedge funds.

To most market participants, hedge funds are assumed to be unimportant, outdated financial vehicles of the past. While there are over 8000 funds in operation at the moment, We hone in on the crème de la crème of this club, approximately 750 funds. Most estimates calculate that this group of people direct the lion’s share of the hedge fund industry’s total capital, and by shadowing their finest stock picks, Insider Monkey has found a few investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Aaron Cowen Suvretta Capital

Aaron Cowen of Suvretta Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the recent hedge fund action encompassing Kimberly-Clark Corporation (NYSE:KMB).

Hedge fund activity in Kimberly-Clark Corporation (NYSE:KMB)

At Q3’s end, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. By comparison, 26 hedge funds held shares or bullish call options in KMB a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

No of Hedge Funds with KMB Positions

Among these funds, AQR Capital Management held the most valuable stake in Kimberly-Clark Corporation (NYSE:KMB), which was worth $331.9 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $231.9 million worth of shares. Citadel Investment Group, Holocene Advisors, and Suvretta 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 Suvretta Capital Management allocated the biggest weight to Kimberly-Clark Corporation (NYSE:KMB), around 4% of its portfolio. Holocene Advisors is also relatively very bullish on the stock, earmarking 1.61 percent of its 13F equity portfolio to KMB.

Since Kimberly-Clark Corporation (NYSE:KMB) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few funds that decided to sell off their positions entirely heading into Q4. At the top of the heap, Javier Velazquez’s Albar Capital said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising about $35.1 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace, also cut its stock, about $8.3 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Kimberly-Clark Corporation (NYSE:KMB). These stocks are Waste Management, Inc. (NYSE:WM), American International Group Inc (NYSE:AIG), TC Energy Corporation (NYSE:TRP), and Infosys Limited (NYSE:INFY). This group of stocks’ market caps are closest to KMB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WM 46 3533060 11
AIG 49 2451222 8
TRP 18 272298 6
INFY 24 1437631 -1
Average 34.25 1923553 6

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $1924 million. That figure was $1622 million in KMB’s case. American International Group Inc (NYSE:AIG) is the most popular stock in this table. On the other hand TC Energy Corporation (NYSE:TRP) is the least popular one with only 18 bullish hedge fund positions. Kimberly-Clark Corporation (NYSE:KMB) 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 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately KMB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on KMB were disappointed as the stock returned -6% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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