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These Hedge Funds Got Into Kimco Realty Corp (KIM) At The Wrong Time

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (10 coronavirus predictions).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With this in mind let’s see whether Kimco Realty Corp (NYSE:KIM) makes for a good investment at the moment. We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Is Kimco Realty Corp (NYSE:KIM) a safe investment today? Money managers are betting on the stock. The number of bullish hedge fund bets rose by 4 lately. Our calculations also showed that KIM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). KIM was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 12 hedge funds in our database with KIM positions at the end of the previous quarter.

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 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 41 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.

Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s go over the latest hedge fund action encompassing Kimco Realty Corp (NYSE:KIM).

What does smart money think about Kimco Realty Corp (NYSE:KIM)?

At Q4’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in KIM over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Zimmer Partners, managed by Stuart J. Zimmer, holds the largest position in Kimco Realty Corp (NYSE:KIM). Zimmer Partners has a $80.8 million position in the stock, comprising 1.1% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, founded by Jim Simons, holding a $57.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism encompass Thomas E. Claugus’s GMT Capital, David Harding’s Winton Capital Management and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Zimmer Partners allocated the biggest weight to Kimco Realty Corp (NYSE:KIM), around 1.12% of its 13F portfolio. GMT Capital is also relatively very bullish on the stock, dishing out 0.67 percent of its 13F equity portfolio to KIM.

As aggregate interest increased, specific money managers were breaking ground themselves. Zimmer Partners, managed by Stuart J. Zimmer, established the biggest position in Kimco Realty Corp (NYSE:KIM). Zimmer Partners had $80.8 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $9.8 million investment in the stock during the quarter. The following funds were also among the new KIM investors: Steve Cohen’s Point72 Asset Management, J. Alan Reid, Jr.’s Forward Management, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s go over hedge fund activity in other stocks similar to Kimco Realty Corp (NYSE:KIM). We will take a look at Store Capital Corporation (NYSE:STOR), James Hardie Industries plc (NYSE:JHX), Athene Holding Ltd. (NYSE:ATH), and Graco Inc. (NYSE:GGG). This group of stocks’ market valuations are closest to KIM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STOR 20 957353 0
JHX 3 9636 0
ATH 35 1368504 -8
GGG 21 234617 -1
Average 19.75 642528 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $643 million. That figure was $184 million in KIM’s case. Athene Holding Ltd. (NYSE:ATH) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular one with only 3 bullish hedge fund positions. Kimco Realty Corp (NYSE:KIM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately KIM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KIM investors were disappointed as the stock returned -48.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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