We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Kaman Corporation (NYSE:KAMN).
Kaman Corporation (NYSE:KAMN) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. KAMN was in 19 hedge funds’ portfolios at the end of December. There were 22 hedge funds in our database with KAMN positions at the end of the previous quarter. Our calculations also showed that KAMN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the eyes of most traders, hedge funds are viewed as slow, old investment tools of years past. While there are over 8000 funds in operation at the moment, We hone in on the leaders of this club, around 850 funds. These money managers command the lion’s share of the hedge fund industry’s total asset base, and by shadowing their highest performing stock picks, Insider Monkey has discovered 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 year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Paul Marshall of Marshall Wace
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the recent hedge fund action surrounding Kaman Corporation (NYSE:KAMN).
How are hedge funds trading Kaman Corporation (NYSE:KAMN)?
Heading into the first quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in KAMN over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Kaman Corporation (NYSE:KAMN) was held by GAMCO Investors, which reported holding $164.3 million worth of stock at the end of September. It was followed by Cardinal Capital with a $49.9 million position. Other investors bullish on the company included Levin Easterly Partners, D E Shaw, and Marshall Wace LLP. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to Kaman Corporation (NYSE:KAMN), around 1.52% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, designating 1.31 percent of its 13F equity portfolio to KAMN.
Seeing as Kaman Corporation (NYSE:KAMN) has experienced falling interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of money managers who sold off their entire stakes heading into Q4. It’s worth mentioning that Mark Coe’s Intrinsic Edge Capital cut the biggest investment of the 750 funds monitored by Insider Monkey, comprising an estimated $7.4 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dropped its stock, about $2.7 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 3 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Kaman Corporation (NYSE:KAMN) but similarly valued. These stocks are Instructure, Inc. (NYSE:INST), 8×8, Inc. (NYSE:EGHT), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), and WestAmerica Bancorp. (NASDAQ:WABC). This group of stocks’ market values are closest to KAMN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INST | 34 | 652643 | 16 |
| EGHT | 14 | 363912 | -11 |
| LGND | 23 | 380175 | 2 |
| WABC | 11 | 27634 | 0 |
| Average | 20.5 | 356091 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $356 million. That figure was $236 million in KAMN’s case. Instructure, Inc. (NYSE:INST) is the most popular stock in this table. On the other hand WestAmerica Bancorp. (NASDAQ:WABC) is the least popular one with only 11 bullish hedge fund positions. Kaman Corporation (NYSE:KAMN) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately KAMN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KAMN investors were disappointed as the stock returned -41.7% during the same time period 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 most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
