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Were Hedge Funds Right About Kimberly Clark Corporation (KMB)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. What do these smart investors think about Kimberly Clark Corporation (NYSE:KMB)?

Kimberly Clark Corporation (NYSE:KMB) has experienced a decrease in hedge fund interest in recent months. KMB was in 37 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 42 hedge funds in our database with KMB positions at the end of the previous quarter. Our calculations also showed that KMB 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).

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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross of Adage Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. 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 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 view the latest hedge fund action regarding Kimberly Clark Corporation (NYSE:KMB).

How are hedge funds trading Kimberly Clark Corporation (NYSE:KMB)?

Heading into the first quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KMB over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in Kimberly Clark Corporation (NYSE:KMB), which was worth $295.3 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $225.1 million worth of shares. Adage Capital Management, Alkeon Capital Management, and Holocene Advisors 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 Diamond Hill Capital allocated the biggest weight to Kimberly Clark Corporation (NYSE:KMB), around 1.13% of its 13F portfolio. Holocene Advisors is also relatively very bullish on the stock, setting aside 1.12 percent of its 13F equity portfolio to KMB.

Due to the fact that Kimberly Clark Corporation (NYSE:KMB) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there were a few money managers that decided to sell off their entire stakes in the third quarter. It’s worth mentioning that Aaron Cowen’s Suvretta Capital Management said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, worth about $154.8 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $21.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 5 funds in the third quarter.

Let’s go over hedge fund activity in other stocks similar to Kimberly Clark Corporation (NYSE:KMB). These stocks are ING Groep N.V. (NYSE:ING), Metlife Inc (NYSE:MET), American Electric Power Company, Inc. (NYSE:AEP), and Emerson Electric Co. (NYSE:EMR). This group of stocks’ market valuations match KMB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ING 14 635357 4
MET 38 2371511 -1
AEP 34 1687802 -1
EMR 41 1165094 2
Average 31.75 1464941 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $1465 million. That figure was $1059 million in KMB’s case. Emerson Electric Co. (NYSE:EMR) is the most popular stock in this table. On the other hand ING Groep N.V. (NYSE:ING) is the least popular one with only 14 bullish hedge fund positions. Kimberly Clark Corporation (NYSE:KMB) is not the most popular stock in this group but hedge fund interest is still above average. 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 1.0% in 2020 through May 1st but still beat the market by 12.9 percentage points. Hedge funds were also right about betting on KMB, though not to the same extent, as the stock returned 0.2% during the first four months of 2020 (through May 1st) and outperformed the market as well.
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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