Hedge Funds Are Piling Into Kontoor Brands, Inc. (KTB)

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 Kontoor Brands, Inc. (NYSE:KTB).

Is Kontoor Brands, Inc. (NYSE:KTB) a buy here? The best stock pickers were getting more optimistic. The number of long hedge fund positions increased by 7 recently. Kontoor Brands, Inc. (NYSE:KTB) was in 23 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that KTB 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.

Ian Wace of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. With all of this in mind we’re going to go over the fresh hedge fund action encompassing Kontoor Brands, Inc. (NYSE:KTB).

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

At second quarter’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 44% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in KTB a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

More specifically, Arrowstreet Capital was the largest shareholder of Kontoor Brands, Inc. (NYSE:KTB), with a stake worth $37.5 million reported as of the end of June. Trailing Arrowstreet Capital was GLG Partners, which amassed a stake valued at $22.7 million. Renaissance Technologies, D E Shaw, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Algert Global allocated the biggest weight to Kontoor Brands, Inc. (NYSE:KTB), around 0.21% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, earmarking 0.16 percent of its 13F equity portfolio to KTB.

As one would reasonably expect, some big names have jumped into Kontoor Brands, Inc. (NYSE:KTB) headfirst. GLG Partners, managed by Noam Gottesman, established the most valuable position in Kontoor Brands, Inc. (NYSE:KTB). GLG Partners had $22.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $9.6 million investment in the stock during the quarter. The following funds were also among the new KTB investors: Paul Tudor Jones’s Tudor Investment Corp, Michael Gelband’s ExodusPoint Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Kontoor Brands, Inc. (NYSE:KTB) but similarly valued. We will take a look at Liberty Latin America Ltd. (NASDAQ:LILA), Vertex, Inc. (NASDAQ:VERX), Cabot Corporation (NYSE:CBT), Ameresco Inc (NYSE:AMRC), Texas Capital Bancshares Inc (NASDAQ:TCBI), MaxLinear, Inc. (NYSE:MXL), and LiveRamp Holdings, Inc. (NYSE:RAMP). This group of stocks’ market valuations are similar to KTB’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $160 million. That figure was $186 million in KTB’s case. Texas Capital Bancshares Inc (NASDAQ:TCBI) is the most popular stock in this table. On the other hand Vertex, Inc. (NASDAQ:VERX) is the least popular one with only 8 bullish hedge fund positions. Kontoor Brands, Inc. (NYSE:KTB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KTB is 79.5. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately KTB wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on KTB were disappointed as the stock returned -7.3% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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