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Should You Buy KB Financial Group, Inc. (KB)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards KB Financial Group, Inc. (NYSE:KB).

KB Financial Group, Inc. (NYSE:KB) was in 7 hedge funds’ portfolios at the end of March. KB has experienced an increase in hedge fund interest in recent months. There were 5 hedge funds in our database with KB positions at the end of the previous quarter. Our calculations also showed that KB isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the latest hedge fund action encompassing KB Financial Group, Inc. (NYSE:KB).

What have hedge funds been doing with KB Financial Group, Inc. (NYSE:KB)?

At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in KB a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in KB Financial Group, Inc. (NYSE:KB) was held by Arrowstreet Capital, which reported holding $24.6 million worth of stock at the end of September. It was followed by Orbis Investment Management with a $8.7 million position. Other investors bullish on the company included Pzena Investment Management, Renaissance Technologies, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Orbis Investment Management allocated the biggest weight to KB Financial Group, Inc. (NYSE:KB), around 0.08% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, earmarking 0.07 percent of its 13F equity portfolio to KB.

Now, some big names were breaking ground themselves. Renaissance Technologies, created the most outsized position in KB Financial Group, Inc. (NYSE:KB). Renaissance Technologies had $1.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.5 million position during the quarter. The only other fund with a new position in the stock is D. E. Shaw’s D E Shaw.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as KB Financial Group, Inc. (NYSE:KB) but similarly valued. We will take a look at IDEX Corporation (NYSE:IEX), Roku, Inc. (NASDAQ:ROKU), Bio-Rad Laboratories, Inc. (NYSE:BIO), and Equity Lifestyle Properties, Inc. (NYSE:ELS). This group of stocks’ market valuations resemble KB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IEX 33 535440 10
ROKU 35 182267 1
BIO 39 874653 -5
ELS 31 452058 8
Average 34.5 511105 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $511 million. That figure was $38 million in KB’s case. Bio-Rad Laboratories, Inc. (NYSE:BIO) is the most popular stock in this table. On the other hand Equity Lifestyle Properties, Inc. (NYSE:ELS) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks KB Financial Group, Inc. (NYSE:KB) is even less popular than ELS. Hedge funds dodged a bullet by taking a bearish stance towards KB. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately KB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); KB investors were disappointed as the stock returned 13.2% during the second quarter (through June 10th) 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 most of these stocks already outperformed the market so far in 2020.

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