Were Hedge Funds Right About KKR & Co Inc. (KKR)?

In this article we will analyze whether KKR & Co Inc. (NYSE:KKR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is KKR & Co Inc. (NYSE:KKR) a safe investment today? Hedge funds were reducing their bets on the stock. The number of long hedge fund bets retreated by 2 lately. KKR & Co Inc. (NYSE:KKR) was in 54 hedge funds’ portfolios at the end of June. The all time high for this statistic is 56. Our calculations also showed that KKR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 56 hedge funds in our database with KKR holdings at the end of March.

To most market participants, hedge funds are perceived as worthless, outdated investment tools of the past. While there are more than 8000 funds in operation at present, Our experts look at the crème de la crème of this club, about 850 funds. These investment experts oversee most of the hedge fund industry’s total asset base, and by watching their matchless stock picks, Insider Monkey has deciphered numerous investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a peek at the new hedge fund action regarding KKR & Co Inc. (NYSE:KKR).

Do Hedge Funds Think KKR Is A Good Stock To Buy Now?

At Q2’s end, a total of 54 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in KKR over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, ValueAct Capital, managed by Mason Morfit, holds the biggest position in KKR & Co Inc. (NYSE:KKR). ValueAct Capital has a $1.6126 billion position in the stock, comprising 19.3% of its 13F portfolio. The second most bullish fund manager is Charles Akre of Akre Capital Management, with a $872.8 million position; 5.4% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions encompass Ric Dillon’s Diamond Hill Capital, John Armitage’s Egerton Capital Limited and John W. Rogers’s Ariel Investments. In terms of the portfolio weights assigned to each position ValueAct Capital allocated the biggest weight to KKR & Co Inc. (NYSE:KKR), around 19.28% of its 13F portfolio. Hudson Way Capital Management is also relatively very bullish on the stock, earmarking 16.87 percent of its 13F equity portfolio to KKR.

Due to the fact that KKR & Co Inc. (NYSE:KKR) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few hedgies who were dropping their entire stakes by the end of the second quarter. Interestingly, Panayotis Takis Sparaggis’s Alkeon Capital Management sold off the largest position of the “upper crust” of funds monitored by Insider Monkey, comprising about $118.3 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $11.5 million worth. These transactions are important to note, as total hedge fund interest was cut by 2 funds by the end of the second quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as KKR & Co Inc. (NYSE:KKR) but similarly valued. These stocks are LyondellBasell Industries NV (NYSE:LYB), Yum! Brands, Inc. (NYSE:YUM), Archer Daniels Midland Company (NYSE:ADM), Hilton Worldwide Holdings Inc (NYSE:HLT), Zimmer Biomet Holdings Inc (NYSE:ZBH), Rockwell Automation Inc. (NYSE:ROK), and Chewy, Inc. (NYSE:CHWY). This group of stocks’ market valuations are closest to KKR’s market valuation.

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As you can see these stocks had an average of 39.7 hedge funds with bullish positions and the average amount invested in these stocks was $1413 million. That figure was $5348 million in KKR’s case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Rockwell Automation Inc. (NYSE:ROK) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks KKR & Co Inc. (NYSE:KKR) is more popular among hedge funds. Our overall hedge fund sentiment score for KKR is 81.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 29.6% in 2021 through November 5th but still managed to beat the market by 3.1 percentage points. Hedge funds were also right about betting on KKR as the stock returned 35.8% since the end of June (through 11/5) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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