Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 15 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 1% through March 15th whereas the S&P 500 Index ETF lost 2.2% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Quaker Chemical Corp (NYSE:KWR) from the perspective of those elite funds.
Is Quaker Chemical Corp (NYSE:KWR) a first-rate stock to buy now? The best stock pickers are taking a bullish view. The number of long hedge fund positions rose by 2 lately. Our calculations also showed that KWR isn’t among the 30 most popular stocks among hedge funds. KWR was in 13 hedge funds’ portfolios at the end of December. There were 11 hedge funds in our database with KWR holdings at the end of the previous quarter.
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.
Let’s check out the new hedge fund action encompassing Quaker Chemical Corp (NYSE:KWR).
How have hedgies been trading Quaker Chemical Corp (NYSE:KWR)?
At the end of the fourth quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KWR over the last 14 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Quaker Chemical Corp (NYSE:KWR), with a stake worth $126.7 million reported as of the end of September. Trailing Royce & Associates was Winton Capital Management, which amassed a stake valued at $11 million. Renaissance Technologies, Millennium Management, and GAMCO Investors were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, some big names were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, initiated the biggest position in Quaker Chemical Corp (NYSE:KWR). Citadel Investment Group had $0.6 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $0.5 million investment in the stock during the quarter. The only other fund with a new position in the stock is Benjamin A. Smith’s Laurion Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Quaker Chemical Corp (NYSE:KWR) but similarly valued. We will take a look at Blueprint Medicines Corporation (NASDAQ:BPMC), Red Rock Resorts, Inc. (NASDAQ:RRR), Hillenbrand, Inc. (NYSE:HI), and Envestnet Inc (NYSE:ENV). This group of stocks’ market valuations resemble KWR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BPMC | 22 | 391311 | -5 |
| RRR | 17 | 304726 | -4 |
| HI | 18 | 50059 | -2 |
| ENV | 12 | 82671 | -1 |
| Average | 17.25 | 207192 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $149 million in KWR’s case. Blueprint Medicines Corporation (NASDAQ:BPMC) is the most popular stock in this table. On the other hand Envestnet Inc (NYSE:ENV) is the least popular one with only 12 bullish hedge fund positions. Quaker Chemical Corp (NYSE:KWR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on KWR, though not to the same extent, as the stock returned 21.1% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
