Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Were Hedge Funds Right About Warming Up To KBR, Inc. (KBR)?

After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 28. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards KBR, Inc. (NYSE:KBR).

KBR, Inc. (NYSE:KBR) investors should be aware of an increase in support from the world’s most elite money managers recently. Our calculations also showed that KBR isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Joe Huber - Huber Capital Management

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to analyze the latest hedge fund action regarding KBR, Inc. (NYSE:KBR).

What does smart money think about KBR, Inc. (NYSE:KBR)?

Heading into the third quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KBR over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with KBR Positions

Among these funds, Pzena Investment Management held the most valuable stake in KBR, Inc. (NYSE:KBR), which was worth $98 million at the end of the second quarter. On the second spot was Huber Capital Management which amassed $83 million worth of shares. Moreover, Citadel Investment Group, Suvretta Capital Management, and Millennium Management were also bullish on KBR, Inc. (NYSE:KBR), allocating a large percentage of their portfolios to this stock.

Consequently, key money managers have been driving this bullishness. Suvretta Capital Management, managed by Aaron Cowen, initiated the biggest position in KBR, Inc. (NYSE:KBR). Suvretta Capital Management had $75.1 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $8.9 million position during the quarter. The other funds with new positions in the stock are Richard Driehaus’s Driehaus Capital, Nick Niell’s Arrowgrass Capital Partners, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s now review hedge fund activity in other stocks similar to KBR, Inc. (NYSE:KBR). We will take a look at Chimera Investment Corporation (NYSE:CIM), Mercury General Corporation (NYSE:MCY), AppFolio Inc (NASDAQ:APPF), and LivaNova PLC (NASDAQ:LIVN). This group of stocks’ market values are similar to KBR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CIM 13 116208 3
MCY 16 191028 1
APPF 12 264675 -3
LIVN 16 183188 -4
Average 14.25 188775 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $189 million. That figure was $600 million in KBR’s case. Mercury General Corporation (NYSE:MCY) is the most popular stock in this table. On the other hand AppFolio Inc (NASDAQ:APPF) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks KBR, Inc. (NYSE:KBR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately KBR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on KBR were disappointed as the stock returned -1.3% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.

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

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.