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 Kansas City Southern (NYSE:KSU) based on that data.
Is Kansas City Southern (NYSE:KSU) going to take off soon? Investors who are in the know are becoming hopeful. The number of long hedge fund positions rose by 5 lately. Our calculations also showed that KSU 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 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.
Richard Chilton of Chilton Investment Company
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. 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. With all of this in mind let’s review the fresh hedge fund action regarding Kansas City Southern (NYSE:KSU).
Hedge fund activity in Kansas City Southern (NYSE:KSU)
At the end of the first quarter, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in KSU over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Fisher Asset Management was the largest shareholder of Kansas City Southern (NYSE:KSU), with a stake worth $67.3 million reported as of the end of September. Trailing Fisher Asset Management was Impala Asset Management, which amassed a stake valued at $63.7 million. Luminus Management, Millennium Management, and Chilton Investment Company 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 Impala Asset Management allocated the biggest weight to Kansas City Southern (NYSE:KSU), around 8.58% of its 13F portfolio. Mountain Road Advisors is also relatively very bullish on the stock, dishing out 6.64 percent of its 13F equity portfolio to KSU.
As industrywide interest jumped, key money managers have jumped into Kansas City Southern (NYSE:KSU) headfirst. Luminus Management, managed by Jonathan Barrett and Paul Segal, established the biggest position in Kansas City Southern (NYSE:KSU). Luminus Management had $52.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $20.2 million position during the quarter. The following funds were also among the new KSU investors: Brandon Haley’s Holocene Advisors, Parvinder Thiara’s Athanor Capital, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Kansas City Southern (NYSE:KSU) but similarly valued. These stocks are International Paper Company (NYSE:IP), Atmos Energy Corporation (NYSE:ATO), Dover Corporation (NYSE:DOV), and Healthpeak Properties, Inc. (NYSE:PEAK). This group of stocks’ market caps are similar to KSU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IP | 29 | 242007 | 4 |
| ATO | 21 | 208767 | -5 |
| DOV | 31 | 644941 | 2 |
| PEAK | 26 | 292181 | 0 |
| Average | 26.75 | 346974 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $347 million. That figure was $524 million in KSU’s case. Dover Corporation (NYSE:DOV) is the most popular stock in this table. On the other hand Atmos Energy Corporation (NYSE:ATO) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Kansas City Southern (NYSE:KSU) 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 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on KSU, though not to the same extent, as the stock returned 15.8% in Q2 (through May 22nd) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
