KKR & Co. L.P. (NYSE:KKR): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

KKR & Co. L.P. (NYSE:KKR) investors should pay attention to an increase in hedge fund sentiment lately.


To most shareholders, hedge funds are viewed as underperforming, old financial vehicles of the past. While there are over 8000 funds trading today, we choose to focus on the aristocrats of this group, about 450 funds. It is widely believed that this group oversees the majority of the hedge fund industry’s total asset base, and by monitoring their best investments, we have identified a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

Just as key, bullish insider trading sentiment is a second way to parse down the marketplace. Just as you’d expect, there are lots of motivations for a corporate insider to drop shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Plenty of academic studies have demonstrated the impressive potential of this strategy if piggybackers understand what to do (learn more here).

Keeping this in mind, we’re going to take a gander at the latest action surrounding KKR & Co. L.P. (NYSE:KKR).

What have hedge funds been doing with KKR & Co. L.P. (NYSE:KKR)?

At the end of the fourth quarter, a total of 19 of the hedge funds we track were bullish in this stock, a change of 6% from the third quarter. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their holdings significantly.

According to our comprehensive database, John W. Rogers’s Ariel Investments had the largest position in KKR & Co. L.P. (NYSE:KKR), worth close to $119 million, accounting for 2.5% of its total 13F portfolio. The second largest stake is held by Leon Cooperman of Omega Advisors, with a $76 million position; 2.2% of its 13F portfolio is allocated to the company. Remaining hedge funds with similar optimism include Thomas E. Claugus’s GMT Capital, Brian Jackelow’s SAB Capital Management and Chuck Royce’s Royce & Associates.

As aggregate interest increased, key hedge funds were breaking ground themselves. Locust Wood Capital Advisers, managed by Stephen J. Errico, assembled the most outsized position in KKR & Co. L.P. (NYSE:KKR). Locust Wood Capital Advisers had 8 million invested in the company at the end of the quarter. Curtis Schenker and Craig Effron’s Scoggin also initiated a $4 million position during the quarter.

How are insiders trading KKR & Co. L.P. (NYSE:KKR)?

Bullish insider trading is particularly usable when the company we’re looking at has seen transactions within the past 180 days. Over the latest 180-day time frame, KKR & Co. L.P. (NYSE:KKR) has experienced zero unique insiders purchasing, and 2 insider sales (see the details of insider trades here).

With the results exhibited by the aforementioned time-tested strategies, retail investors must always keep an eye on hedge fund and insider trading sentiment, and KKR & Co. L.P. (NYSE:KKR) is an important part of this process.

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Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.