Should You Avoid Kilroy Realty Corp (KRC)? – Highwoods Properties Inc (HIW), Liberty Property Trust (LRY)

Is Kilroy Realty Corp (NYSE:KRC) a buy right now? The smart money is reducing their bets on the stock. The number of bullish hedge fund positions went down by 2 in recent months.

Kilroy Realty Corp (NYSE:KRC)

In the eyes of most shareholders, hedge funds are viewed as unimportant, outdated financial tools of yesteryear. While there are more than 8000 funds in operation at the moment, we choose to focus on the top tier of this group, around 450 funds. Most estimates calculate that this group oversees most of all hedge funds’ total capital, and by monitoring their top picks, we have unearthed a few investment strategies that have historically outstripped 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 began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).

Equally as integral, bullish insider trading sentiment is another way to break down the financial markets. There are a variety of incentives for a bullish insider to sell shares of his or her company, but just one, very clear reason why they would initiate a purchase. Various empirical studies have demonstrated the useful potential of this strategy if “monkeys” know what to do (learn more here).

Keeping this in mind, we’re going to take a peek at the recent action regarding Kilroy Realty Corp (NYSE:KRC).

Hedge fund activity in Kilroy Realty Corp (NYSE:KRC)

At year’s end, a total of 9 of the hedge funds we track held long positions in this stock, a change of -18% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes substantially.

According to our comprehensive database, Jeffrey Furber’s AEW Capital Management had the most valuable position in Kilroy Realty Corp (NYSE:KRC), worth close to $101 million, comprising 2.7% of its total 13F portfolio. The second largest stake is held by Millennium Management, managed by Israel Englander, which held a $34.5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other hedgies that hold long positions include Malcolm Fairbairn’s Ascend Capital, Cliff Asness’s AQR Capital Management and Ken Griffin’s Citadel Investment Group.

Since Kilroy Realty Corp (NYSE:KRC) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there exists a select few funds that elected to cut their positions entirely at the end of the year. Interestingly, Ken Gray and Steve Walsh’s Bryn Mawr Capital cut the largest position of the “upper crust” of funds we key on, worth about $3.2 million in stock., and Thomas Bailard of Bailard Inc was right behind this move, as the fund sold off about $1.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds at the end of the year.

What have insiders been doing with Kilroy Realty Corp (NYSE:KRC)?

Insider trading activity, especially when it’s bullish, is best served when the company we’re looking at has seen transactions within the past six months. Over the latest six-month time frame, Kilroy Realty Corp (NYSE:KRC) has seen zero unique insiders purchasing, and 2 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Kilroy Realty Corp (NYSE:KRC). These stocks are CommonWealth REIT (NYSE:CWH), Highwoods Properties Inc (NYSE:HIW), Liberty Property Trust (NYSE:LRY), Piedmont Office Realty Trust, Inc. (NYSE:PDM), and Alexandria Real Estate Equities Inc (NYSE:ARE). This group of stocks are in the reit – office industry and their market caps are closest to KRC’s market cap.