Hedge Funds Are Piling Into KKR & Co Inc. (KKR)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards KKR & Co Inc. (NYSE:KKR).

KKR & Co Inc. (NYSE:KKR) investors should pay attention to an increase in activity from the world’s largest hedge funds of late. KKR & Co Inc. (NYSE:KKR) was in 56 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 56. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that KKR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind we’re going to check out the key hedge fund action encompassing KKR & Co Inc. (NYSE:KKR).

John Rogers of Ariel Investments

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

Heading into the fourth quarter of 2021, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in KKR over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Jeffrey Ubben’s ValueAct Capital has the biggest position in KKR & Co Inc. (NYSE:KKR), worth close to $1.4645 billion, corresponding to 17% of its total 13F portfolio. Coming in second is Akre Capital Management, managed by Charles Akre, which holds a $896.8 million position; 5.5% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions encompass John Armitage’s Egerton Capital Limited, John W. Rogers’s Ariel Investments and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position ValueAct Capital allocated the biggest weight to KKR & Co Inc. (NYSE:KKR), around 16.96% of its 13F portfolio. Blacksheep Fund Management is also relatively very bullish on the stock, dishing out 15.83 percent of its 13F equity portfolio to KKR.

Now, some big names have jumped into KKR & Co Inc. (NYSE:KKR) headfirst. Renaissance Technologies, established the largest position in KKR & Co Inc. (NYSE:KKR). Renaissance Technologies had $18.2 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $6.1 million position during the quarter. The other funds with brand new KKR positions are Jinghua Yan’s TwinBeech Capital, Daniel Johnson’s Gillson Capital, and D. E. Shaw’s D E Shaw.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as KKR & Co Inc. (NYSE:KKR) but similarly valued. These stocks are Otis Worldwide Corporation (NYSE:OTIS), AFLAC Incorporated (NYSE:AFL), The Hershey Company (NYSE:HSY), NatWest Group plc (NYSE:NWG), Welltower Inc. (NYSE:WELL), TransDigm Group Incorporated (NYSE:TDG), and Rockwell Automation Inc. (NYSE:ROK). All of these stocks’ market caps are closest to KKR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.4 hedge funds with bullish positions and the average amount invested in these stocks was $1704 million. That figure was $4652 million in KKR’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand NatWest Group plc (NYSE:NWG) is the least popular one with only 7 bullish hedge fund positions. KKR & Co Inc. (NYSE:KKR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KKR is 80.8. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on KKR as the stock returned 22.5% since the end of Q3 (through 11/30) 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.