KKR & Co (KKR) Stock Has Risen 30% in Last One Year, Outperforms Market

If you are looking for the best ideas for your portfolio you may want to consider some of Greenhaven Road Capital‘s top stock picks. Greenhaven Road Capital, an investment management firm, is bullish on KKR & Co. Inc. (NYSE:KKR) stock. In its Q3 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on KKR & Co. Inc. (NYSE:KKR) stock. KKR & Co. Inc. (NYSE:KKR) is a capital market company.

On October 13, 2019, Greenhaven Road Capital had released its Q3 2019 investor letter. KKR & Co. Inc. (NYSE:KKR) was one of the Top 5 holdings of Greenhaven in Q3 2019. The stock has posted a return of 30% in the trailing one year period, outperforming the S&P 500 Index which returned 15% in the same period. This suggests that the investment firm was right in its decision.

Earlier this month, we published an article revealing Greenhaven’s bullish investment thesis on KKR & Co. Inc. (NYSE:KKR) stock in its Q3 2020 investor letter. This suggests that the investment firm has been bullish for a long time on KKR & Co. Inc. (NYSE:KKR).

Greenhaven’s fund posted a return of less than 1% in the third quarter of 2019, underperforming the S&P 500 Index which returned 1.7% in the same quarter. Let’s take a look at comments made by Greenhaven Road Capital about KKR & Co. Inc. (NYSE:KKR) in the Q3 2019 investor letter.

“KKR & Co. (KKR) – The thesis remains the same, a strong balance sheet with $17+/share in cash and investments, an undemanding sub-6X distributable earnings valuation (ex cash and investments), conservative accounting, high insider ownership (40%+), and strong secular tailwinds with the industry growing AUM at +12% per year. KKR shares sold off more than 10% on news of Elizabeth Warren’s bill targeting private equity. In the short term, her bill will certainly be part of her campaign trail talking points. However, for the bill to actually become a law would seem to require not only that Warren becomes the nominee and beats the incumbent, but also that Democrats also carry the House and Senate. On top of this, it would also require that private equity lobbying groups also prove ineffective at muting the legislation.

The proposal has three major components. The first is eliminating the preferential carried interest tax treatment, which would not impact us as shareholders at all. The second taxes certain “monitoring” fees at 100%, effectively eliminating them. KKR does not break out the materiality of these fees, but given the employees own 40% of the firm and have over $5B of their own money invested in KKR funds, it seems unlikely that charging themselves fees is the secret sauce at KKR. The final component of the legislation would tie the debt and pension obligations back to the funds. It seems highly unlikely that this feature can be done retroactively or would apply to non-U.S. companies, but going forward it could make the more levered companies less attractive, and it could help employ hundreds of lawyers to find the workarounds. In my opinion, none of these policies should impact the flow of AUM to KKR. Clearly, having Elizabeth Warren on the campaign trail vilifying private equity funds is not ideal here, but her actual proposal is by no means a death blow to KKR. The only thing I know for sure is that nothing will happen before 2021.”

In Q2 2020, the number of bullish hedge fund positions on KKR & Co. Inc. (NYSE:KKR) stock decreased by about 6% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t believe in KKR’s growth potential. Our calculations showed that KKR & Co. Inc. (NYSE:KKR) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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