Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Korea Electric Power Corporation (NYSE:KEP)? The smart money sentiment can provide an answer to this question.
Korea Electric Power Corporation (NYSE:KEP) investors should be aware of an increase in hedge fund interest lately. KEP was in 9 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 4 hedge funds in our database with KEP positions at the end of the previous quarter. Our calculations also showed that KEP isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a gander at the latest hedge fund action regarding Korea Electric Power Corporation (NYSE:KEP).
What does the smart money think about Korea Electric Power Corporation (NYSE:KEP)?
Heading into the first quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 125% from the previous quarter. The graph below displays the number of hedge funds with bullish position in KEP over the last 14 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Orbis Investment Management was the largest shareholder of Korea Electric Power Corporation (NYSE:KEP), with a stake worth $23 million reported as of the end of September. Trailing Orbis Investment Management was LMR Partners, which amassed a stake valued at $13.4 million. Arrowstreet Capital, Kopernik Global Investors, and Cognios Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in Korea Electric Power Corporation (NYSE:KEP). Arrowstreet Capital had $5.1 million invested in the company at the end of the quarter. David Iben’s Kopernik Global Investors also made a $1.5 million investment in the stock during the quarter. The other funds with brand new KEP positions are John Brandmeyer’s Cognios Capital, John Overdeck and David Siegel’s Two Sigma Advisors, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now review hedge fund activity in other stocks similar to Korea Electric Power Corporation (NYSE:KEP). These stocks are IHS Markit Ltd. (NASDAQ:INFO), Motorola Solutions Inc (NYSE:MSI), Realty Income Corporation (NYSE:O), and Northern Trust Corporation (NASDAQ:NTRS). All of these stocks’ market caps resemble KEP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INFO | 27 | 1041562 | -4 |
| MSI | 23 | 589401 | -3 |
| O | 18 | 305732 | 2 |
| NTRS | 37 | 732024 | 2 |
| Average | 26.25 | 667180 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $667 million. That figure was $45 million in KEP’s case. Northern Trust Corporation (NASDAQ:NTRS) is the most popular stock in this table. On the other hand Realty Income Corporation (NYSE:O) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Korea Electric Power Corporation (NYSE:KEP) is even less popular than O. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately KEP wasn’t in this group. Hedge funds that bet on KEP were disappointed as the stock returned 3.9% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
