There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Kimball Electronics Inc (NASDAQ:KE) .
Kimball Electronics Inc (NASDAQ:KE) shareholders have witnessed an increase in support from the world’s most successful money managers of late. KE was in 9 hedge funds’ portfolios at the end of the third quarter of 2016. There were 8 hedge funds in our database with KE positions at the end of the previous quarter. At the end of this article we will also compare KE to other stocks including Cross Country Healthcare, Inc. (NASDAQ:CCRN), Cowen Group, Inc. (NASDAQ:COWN), and Guaranty Bancorp (NASDAQ:GBNK) to get a better sense of its popularity.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Now, let’s view the latest action encompassing Kimball Electronics Inc (NASDAQ:KE).
What does the smart money think about Kimball Electronics Inc (NASDAQ:KE)?
Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a growth of 13% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in KE heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s institutional investor database, Royce & Associates, led by Chuck Royce, holds the biggest position in Kimball Electronics Inc (NASDAQ:KE). Royce & Associates has a $7.5 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second most bullish fund manager is Hawk Ridge Management, led by David Brown, holding a $4.2 million position; the fund has 2.3% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish include Renaissance Technologies, one of the biggest hedge funds in the world, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and D. E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, some big names have been driving this bullishness. Citadel Investment Group, led by Ken Griffin, established the largest position in Kimball Electronics Inc (NASDAQ:KE). Citadel Investment Group had $0.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.1 million investment in the stock during the quarter.
Let’s check out hedge fund activity in other stocks similar to Kimball Electronics Inc (NASDAQ:KE). These stocks are Cross Country Healthcare, Inc. (NASDAQ:CCRN), Cowen Group, Inc. (NASDAQ:COWN), Guaranty Bancorp (NASDAQ:GBNK), and Ascendis Pharma A/S (NASDAQ:ASND). This group of stocks’ market valuations match KE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CCRN | 13 | 16861 | 3 |
| COWN | 10 | 120445 | -1 |
| GBNK | 10 | 69502 | 0 |
| ASND | 12 | 154777 | 1 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $18 million in KE’s case. Cross Country Healthcare, Inc. (NASDAQ:CCRN) is the most popular stock in this table. On the other hand Cowen Group, Inc. (NASDAQ:COWN) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Kimball Electronics Inc (NASDAQ:KE) is even less popular than COWN. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
