We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Knowles Corp (NYSE:KN) based on that data.
Is Knowles Corp (NYSE:KN) a bargain? Prominent investors are selling. The number of bullish hedge fund bets decreased by 9 lately. Our calculations also showed that KN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Rogers of Ariel Investments
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the fresh hedge fund action surrounding Knowles Corp (NYSE:KN).
What have hedge funds been doing with Knowles Corp (NYSE:KN)?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the fourth quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in KN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Ariel Investments, managed by John W. Rogers, holds the largest position in Knowles Corp (NYSE:KN). Ariel Investments has a $59.4 million position in the stock, comprising 1% of its 13F portfolio. Coming in second is Falcon Edge Capital, led by Richard Gerson and Navroz D. Udwadia, holding a $58.4 million position; 6.4% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions include Ken Fisher’s Fisher Asset Management, D. E. Shaw’s D E Shaw and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Falcon Edge Capital allocated the biggest weight to Knowles Corp (NYSE:KN), around 6.39% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, designating 1.04 percent of its 13F equity portfolio to KN.
Judging by the fact that Knowles Corp (NYSE:KN) has faced falling interest from the smart money, it’s safe to say that there was a specific group of money managers that decided to sell off their positions entirely heading into Q4. Interestingly, Mark Coe’s Intrinsic Edge Capital dumped the biggest stake of the 750 funds tracked by Insider Monkey, totaling an estimated $8.6 million in stock, and Richard Driehaus’s Driehaus Capital was right behind this move, as the fund cut about $6.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 9 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to Knowles Corp (NYSE:KN). These stocks are Northwest Bancshares, Inc. (NASDAQ:NWBI), Cardiovascular Systems Inc (NASDAQ:CSII), USANA Health Sciences, Inc. (NYSE:USNA), and Amerisafe, Inc. (NASDAQ:AMSF). All of these stocks’ market caps are similar to KN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NWBI | 14 | 20443 | -5 |
| CSII | 12 | 86525 | -4 |
| USNA | 13 | 133207 | 1 |
| AMSF | 9 | 35964 | -1 |
| Average | 12 | 69035 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $206 million in KN’s case. Northwest Bancshares, Inc. (NASDAQ:NWBI) is the most popular stock in this table. On the other hand Amerisafe, Inc. (NASDAQ:AMSF) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Knowles Corp (NYSE:KN) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but still managed to beat the market by 14.8 percentage points. Hedge funds were also right about betting on KN, though not to the same extent, as the stock returned 20.9% in Q2 (through June 17th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
