Should I Buy Kearny Financial Corp. (KRNY)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Kearny Financial Corp. (NASDAQ:KRNY) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Kearny Financial Corp. (NASDAQ:KRNY) has seen an increase in support from the world’s most elite money managers in recent months. Kearny Financial Corp. (NASDAQ:KRNY) was in 21 hedge funds’ portfolios at the end of June. The all time high for this statistics is 22. There were 15 hedge funds in our database with KRNY positions at the end of the first quarter. Our calculations also showed that KRNY isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we’re going to go over the key hedge fund action encompassing Kearny Financial Corp. (NASDAQ:KRNY).

How have hedgies been trading Kearny Financial Corp. (NASDAQ:KRNY)?

At second quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in KRNY a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is KRNY A Good Stock To Buy?

The largest stake in Kearny Financial Corp. (NASDAQ:KRNY) was held by Renaissance Technologies, which reported holding $48.5 million worth of stock at the end of September. It was followed by Castine Capital Management with a $6.6 million position. Other investors bullish on the company included Ancora Advisors, Adage Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Castine Capital Management allocated the biggest weight to Kearny Financial Corp. (NASDAQ:KRNY), around 5.07% of its 13F portfolio. Swift Run Capital Management is also relatively very bullish on the stock, dishing out 1.57 percent of its 13F equity portfolio to KRNY.

With a general bullishness amongst the heavyweights, some big names have jumped into Kearny Financial Corp. (NASDAQ:KRNY) headfirst. AQR Capital Management, managed by Cliff Asness, created the most outsized position in Kearny Financial Corp. (NASDAQ:KRNY). AQR Capital Management had $2.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $1.8 million investment in the stock during the quarter. The other funds with brand new KRNY positions are Michael Gelband’s ExodusPoint Capital, Donald Sussman’s Paloma Partners, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s now review hedge fund activity in other stocks similar to Kearny Financial Corp. (NASDAQ:KRNY). These stocks are Republic Bancorp, Inc. KY (NASDAQ:RBCAA), Five Point Holdings, LLC (NYSE:FPH), Ebix Inc (NASDAQ:EBIX), Antero Resources Corp (NYSE:AR), Relmada Therapeutics, Inc. (NASDAQ:RLMD), Vocera Communications Inc (NYSE:VCRA), and Twin River Worldwide Holdings Inc. (NYSE:TRWH). This group of stocks’ market valuations are closest to KRNY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RBCAA 5 7119 0
FPH 14 162958 1
EBIX 17 57501 2
AR 21 145841 0
RLMD 11 154199 2
VCRA 15 116996 0
TRWH 18 156678 5
Average 14.4 114470 1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.4 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $79 million in KRNY’s case. Antero Resources Corp (NYSE:AR) is the most popular stock in this table. On the other hand Republic Bancorp, Inc. KY (NASDAQ:RBCAA) is the least popular one with only 5 bullish hedge fund positions. Kearny Financial Corp. (NASDAQ:KRNY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KRNY is 88.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately KRNY wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on KRNY were disappointed as the stock returned -10.9% in Q3 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.