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Were Hedge Funds Right About Kite Realty Group Trust (KRG)?

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 (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. Is Kite Realty Group Trust (NYSE:KRG) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Kite Realty Group Trust (NYSE:KRG) investors should be aware of an increase in hedge fund interest recently. KRG was in 13 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 11 hedge funds in our database with KRG holdings at the end of the previous quarter. Our calculations also showed that KRG 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).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. 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 let’s take a gander at the key hedge fund action regarding Kite Realty Group Trust (NYSE:KRG).

Hedge fund activity in Kite Realty Group Trust (NYSE:KRG)

At the end of the fourth quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards KRG over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Kite Realty Group Trust (NYSE:KRG), with a stake worth $62.5 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $4.9 million. Winton Capital Management, Intrinsic Edge Capital, and Two Sigma 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 Intrinsic Edge Capital allocated the biggest weight to Kite Realty Group Trust (NYSE:KRG), around 0.31% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.19 percent of its 13F equity portfolio to KRG.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Winton Capital Management, managed by David Harding, created the most outsized position in Kite Realty Group Trust (NYSE:KRG). Winton Capital Management had $3 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $0.4 million investment in the stock during the quarter. The other funds with brand new KRG positions are Benjamin A. Smith’s Laurion Capital Management, Schonfeld Strategic Advisors, and Mika Toikka’s AlphaCrest Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Kite Realty Group Trust (NYSE:KRG) but similarly valued. We will take a look at BP Midstream Partners LP (NYSE:BPMP), Talos Energy, Inc. (NYSE:TALO), Sunrun Inc (NASDAQ:RUN), and Eagle Bancorp, Inc. (NASDAQ:EGBN). This group of stocks’ market caps are similar to KRG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BPMP 6 27556 0
TALO 14 62279 -2
RUN 23 470192 5
EGBN 18 36520 1
Average 15.25 149137 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $82 million in KRG’s case. Sunrun Inc (NASDAQ:RUN) is the most popular stock in this table. On the other hand BP Midstream Partners LP (NYSE:BPMP) is the least popular one with only 6 bullish hedge fund positions. Kite Realty Group Trust (NYSE:KRG) 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 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately KRG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KRG investors were disappointed as the stock returned -57.5% 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 2020.
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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