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Were Hedge Funds Right About Dumping Kemper Corporation (KMPR)?

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. We at Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Kemper Corporation (NYSE:KMPR) and determine whether the smart money was really smart about this stock.

Is Kemper Corporation (NYSE:KMPR) a buy right now? Money managers were in a pessimistic mood. The number of bullish hedge fund positions shrunk by 7 in recent months. Our calculations also showed that KMPR 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.

In the financial world there are many signals shareholders have at their disposal to size up stocks. A duo of the most underrated signals are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the S&P 500 by a superb amount (see the details here).

Ken Fisher FISHER ASSET MANAGEMENT

Ken Fisher of Fisher Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 most profitable companies in the world to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the fresh hedge fund action surrounding Kemper Corporation (NYSE:KMPR).

How have hedgies been trading Kemper Corporation (NYSE:KMPR)?

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -35% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in KMPR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Kemper Corporation (NYSE:KMPR), which was worth $16.9 million at the end of the third quarter. On the second spot was Millennium Management which amassed $7.6 million worth of shares. Marshall Wace LLP, Prospector Partners, and Balyasny Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Kemper Corporation (NYSE:KMPR), around 0.86% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, earmarking 0.68 percent of its 13F equity portfolio to KMPR.

Seeing as Kemper Corporation (NYSE:KMPR) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few fund managers that decided to sell off their entire stakes in the first quarter. At the top of the heap, Noam Gottesman’s GLG Partners cut the largest investment of the 750 funds followed by Insider Monkey, valued at close to $3.5 million in stock. James Dondero’s fund, Highland Capital Management, also dumped its stock, about $2.3 million worth. These transactions are important to note, as total hedge fund interest dropped by 7 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Kemper Corporation (NYSE:KMPR) but similarly valued. These stocks are Levi Strauss & Co. (NYSE:LEVI), Ralph Lauren Corporation (NYSE:RL), Lear Corporation (NYSE:LEA), and Smartsheet Inc. (NYSE:SMAR). This group of stocks’ market values match KMPR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LEVI 11 34012 0
RL 26 402740 -11
LEA 28 581083 -1
SMAR 41 1678822 -3
Average 26.5 674164 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $674 million. That figure was $49 million in KMPR’s case. Smartsheet Inc. (NYSE:SMAR) is the most popular stock in this table. On the other hand Levi Strauss & Co. (NYSE:LEVI) is the least popular one with only 11 bullish hedge fund positions. Kemper Corporation (NYSE:KMPR) 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 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately KMPR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); KMPR investors were disappointed as the stock returned -2.7% during the second quarter 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 in 2020.

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