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

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Kimberly Clark Corporation (NYSE:KMB) based on that data and determine whether they were really smart about the stock.

Is Kimberly Clark Corporation (NYSE:KMB) a buy, sell, or hold? Prominent investors were getting more bullish. The number of long hedge fund bets rose by 9 lately. Our calculations also showed that KMB 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). KMB was in 46 hedge funds’ portfolios at the end of the first quarter of 2020. There were 37 hedge funds in our database with KMB positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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 let’s take a peek at the new hedge fund action surrounding Kimberly Clark Corporation (NYSE:KMB).

Hedge fund activity in Kimberly Clark Corporation (NYSE:KMB)

Heading into the second quarter of 2020, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KMB over the last 18 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.

Among these funds, AQR Capital Management held the most valuable stake in Kimberly Clark Corporation (NYSE:KMB), which was worth $304.6 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $222.1 million worth of shares. Holocene Advisors, Alkeon Capital Management, and D E Shaw 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 Sandbar Asset Management allocated the biggest weight to Kimberly Clark Corporation (NYSE:KMB), around 2.38% of its 13F portfolio. Holocene Advisors is also relatively very bullish on the stock, earmarking 1.61 percent of its 13F equity portfolio to KMB.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Renaissance Technologies, assembled the most valuable position in Kimberly Clark Corporation (NYSE:KMB). Renaissance Technologies had $71.7 million invested in the company at the end of the quarter. Michael Hintze’s CQS Cayman LP also initiated a $16.9 million position during the quarter. The other funds with brand new KMB positions are Dmitry Balyasny’s Balyasny Asset Management, Steven Boyd’s Armistice Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Kimberly Clark Corporation (NYSE:KMB) but similarly valued. These stocks are Marsh & McLennan Companies, Inc. (NYSE:MMC), Deere & Company (NYSE:DE), Global Payments Inc (NYSE:GPN), and The Charles Schwab Corporation (NYSE:SCHW). This group of stocks’ market values are similar to KMB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MMC 37 668435 6
DE 44 875005 -6
GPN 67 2154936 3
SCHW 62 2907493 -8
Average 52.5 1651467 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 52.5 hedge funds with bullish positions and the average amount invested in these stocks was $1651 million. That figure was $1173 million in KMB’s case. Global Payments Inc (NYSE:GPN) is the most popular stock in this table. On the other hand Marsh & McLennan Companies, Inc. (NYSE:MMC) is the least popular one with only 37 bullish hedge fund positions. Kimberly Clark Corporation (NYSE:KMB) 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately KMB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); KMB investors were disappointed as the stock returned 11.4% 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.