Hedge Funds Are Buying The Kroger Co. (KR)

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding The Kroger Co. (NYSE:KR).

The Kroger Co. (NYSE:KR) was in 39 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 46. KR has seen an increase in enthusiasm from smart money recently. There were 35 hedge funds in our database with KR holdings at the end of March. Our calculations also showed that KR isn’t among the 30 most popular stocks among hedge funds (click for Q2 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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Michael Gelband of ExodusPoint Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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. Now we’re going to take a gander at the recent hedge fund action regarding The Kroger Co. (NYSE:KR).

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

At the end of June, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in KR over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Warren Buffett’s Berkshire Hathaway has the number one position in The Kroger Co. (NYSE:KR), worth close to $2.3671 billion, accounting for 0.8% of its total 13F portfolio. On Berkshire Hathaway’s heels is Renaissance Technologies, with a $679.3 million position; 0.8% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions comprise Cliff Asness’s AQR Capital Management, Ray Dalio’s Bridgewater Associates and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Game Creek Capital allocated the biggest weight to The Kroger Co. (NYSE:KR), around 2.94% of its 13F portfolio. Te Ahumairangi Investment Management is also relatively very bullish on the stock, earmarking 1.88 percent of its 13F equity portfolio to KR.

Now, key money managers have jumped into The Kroger Co. (NYSE:KR) headfirst. ExodusPoint Capital, managed by Michael Gelband, established the biggest position in The Kroger Co. (NYSE:KR). ExodusPoint Capital had $4.3 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also made a $2.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Jinghua Yan’s TwinBeech Capital, Andrew Weiss’s Weiss Asset Management, and Mike Vranos’s Ellington.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as The Kroger Co. (NYSE:KR) but similarly valued. We will take a look at State Street Corporation (NYSE:STT), Keysight Technologies Inc (NYSE:KEYS), AMC Entertainment Holdings Inc (NYSE:AMC), Zebra Technologies Corporation (NASDAQ:ZBRA), Verisk Analytics, Inc. (NASDAQ:VRSK), Maxim Integrated Products Inc. (NASDAQ:MXIM), and Synchrony Financial (NYSE:SYF). This group of stocks’ market caps match KR’s market cap.

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As you can see these stocks had an average of 36.4 hedge funds with bullish positions and the average amount invested in these stocks was $1539 million. That figure was $3562 million in KR’s case. Maxim Integrated Products Inc. (NASDAQ:MXIM) is the most popular stock in this table. On the other hand AMC Entertainment Holdings Inc (NYSE:AMC) is the least popular one with only 21 bullish hedge fund positions. The Kroger Co. (NYSE:KR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KR is 60.1. 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 gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on KR as the stock returned 3.8% since the end of Q2 (through 10/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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