We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Knoll Inc (NYSE:KNL).
Knoll Inc (NYSE:KNL) was in 16 hedge funds’ portfolios at the end of June. KNL shareholders have witnessed a decrease in hedge fund interest recently. There were 19 hedge funds in our database with KNL positions at the end of the previous quarter. Our calculations also showed that KNL isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the recent hedge fund action encompassing Knoll Inc (NYSE:KNL).
Hedge fund activity in Knoll Inc (NYSE:KNL)
At Q2’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in KNL a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the biggest position in Knoll Inc (NYSE:KNL), worth close to $15.5 million, corresponding to less than 0.1%% of its total 13F portfolio. On Adage Capital Management’s heels is D E Shaw, led by D. E. Shaw, holding a $10.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions consist of Renaissance Technologies, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group.
Due to the fact that Knoll Inc (NYSE:KNL) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of hedge funds that elected to cut their entire stakes heading into Q3. Intriguingly, Brandon Osten’s Venator Capital Management cut the largest stake of all the hedgies monitored by Insider Monkey, worth an estimated $1.7 million in stock. Andrew Feldstein and Stephen Siderow’s fund, Blue Mountain Capital, also cut its stock, about $0.8 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds heading into Q3.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Knoll Inc (NYSE:KNL) but similarly valued. These stocks are Guess’, Inc. (NYSE:GES), Perficient, Inc. (NASDAQ:PRFT), Opera Limited (NASDAQ:OPRA), and Garrett Motion Inc. (NYSE:GTX). All of these stocks’ market caps resemble KNL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GES | 15 | 85146 | -3 |
| PRFT | 16 | 51120 | 0 |
| OPRA | 6 | 19440 | 1 |
| GTX | 23 | 290830 | 4 |
| Average | 15 | 111634 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $112 million. That figure was $67 million in KNL’s case. Garrett Motion Inc. (NYSE:GTX) is the most popular stock in this table. On the other hand Opera Limited (NASDAQ:OPRA) is the least popular one with only 6 bullish hedge fund positions. Knoll Inc (NYSE:KNL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on KNL as the stock returned 11.1% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
