Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether Kilroy Realty Corp (NYSE:KRC) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Kilroy Realty Corp (NYSE:KRC) worth your attention right now? Investors who are in the know are turning less bullish. The number of bullish hedge fund positions were trimmed by 8 in recent months. Our calculations also showed that KRC 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). KRC was in 18 hedge funds’ portfolios at the end of December. There were 26 hedge funds in our database with KRC holdings at the end of the previous quarter.
At the moment there are many signals stock traders can use to size up their holdings. Some of the most innovative signals are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can beat the S&P 500 by a healthy amount (see the details here).
Stuart Zimmer of Zimmer Partners
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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 let’s take a peek at the recent hedge fund action encompassing Kilroy Realty Corp (NYSE:KRC).
How are hedge funds trading Kilroy Realty Corp (NYSE:KRC)?
At Q4’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from the third quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in KRC a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Long Pond Capital held the most valuable stake in Kilroy Realty Corp (NYSE:KRC), which was worth $50.6 million at the end of the third quarter. On the second spot was Zimmer Partners which amassed $30.6 million worth of shares. Balyasny Asset Management, Millennium Management, 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 Hill Winds Capital allocated the biggest weight to Kilroy Realty Corp (NYSE:KRC), around 5.83% of its 13F portfolio. Long Pond Capital is also relatively very bullish on the stock, dishing out 1.29 percent of its 13F equity portfolio to KRC.
Since Kilroy Realty Corp (NYSE:KRC) has faced falling interest from hedge fund managers, logic holds that there exists a select few fund managers that elected to cut their full holdings last quarter. It’s worth mentioning that Daniel Johnson’s Gillson Capital sold off the largest investment of the 750 funds watched by Insider Monkey, totaling close to $6.3 million in call options. Gavin Saitowitz and Cisco J. del Valle’s fund, Springbok Capital, also dumped its call options, about $4.4 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 8 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Kilroy Realty Corp (NYSE:KRC). These stocks are Zions Bancorporation (NASDAQ:ZION), Ralph Lauren Corporation (NYSE:RL), Bright Horizons Family Solutions Inc (NYSE:BFAM), and Kimco Realty Corp (NYSE:KIM). This group of stocks’ market values resemble KRC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZION | 43 | 597267 | 13 |
| RL | 37 | 988865 | 4 |
| BFAM | 34 | 343904 | 4 |
| KIM | 16 | 183873 | 4 |
| Average | 32.5 | 528477 | 6.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $528 million. That figure was $183 million in KRC’s case. Zions Bancorporation (NASDAQ:ZION) is the most popular stock in this table. On the other hand Kimco Realty Corp (NYSE:KIM) is the least popular one with only 16 bullish hedge fund positions. Kilroy Realty Corp (NYSE:KRC) 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 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately KRC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KRC investors were disappointed as the stock returned -33% 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 Q1.
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.
