Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Kohl’s Corporation (NYSE:KSS) from the perspective of those elite funds.
Kohl’s Corporation (NYSE:KSS) investors should be aware of an increase in hedge fund sentiment lately. Our calculations also showed that KSS isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike this former hedge fund manager 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. Let’s take a look at the new hedge fund action regarding Kohl’s Corporation (NYSE:KSS).
Hedge fund activity in Kohl’s Corporation (NYSE:KSS)
At the end of the second quarter, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KSS over the last 16 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in Kohl’s Corporation (NYSE:KSS) was held by AQR Capital Management, which reported holding $178.5 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $149.7 million position. Other investors bullish on the company included Millennium Management, Bridgewater Associates, and Citadel Investment Group.
As aggregate interest increased, key money managers were breaking ground themselves. Steadfast Capital Management, managed by Robert Pitts, established the most valuable position in Kohl’s Corporation (NYSE:KSS). Steadfast Capital Management had $28.3 million invested in the company at the end of the quarter. Brett Hendrickson’s Nokomis Capital also initiated a $12.7 million position during the quarter. The following funds were also among the new KSS investors: Michael Hintze’s CQS Cayman LP, Mike Vranos’s Ellington, and Michael Hintze’s CQS Cayman LP.
Let’s now take a look at hedge fund activity in other stocks similar to Kohl’s Corporation (NYSE:KSS). We will take a look at Kilroy Realty Corp (NYSE:KRC), The Middleby Corporation (NASDAQ:MIDD), Momo Inc (NASDAQ:MOMO), and BeiGene, Ltd. (NASDAQ:BGNE). This group of stocks’ market valuations are closest to KSS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KRC | 16 | 161727 | 5 |
| MIDD | 27 | 554379 | 7 |
| MOMO | 22 | 855304 | 1 |
| BGNE | 12 | 1643941 | -3 |
| Average | 19.25 | 803838 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $804 million. That figure was $550 million in KSS’s case. The Middleby Corporation (NASDAQ:MIDD) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Kohl’s Corporation (NYSE:KSS) 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. Hedge funds were also right about betting on KSS as the stock returned 5.8% during Q3 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.
Disclosure: None. This article was originally published at Insider Monkey.
