Is FSK A Good Stock To Buy Now?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of FS KKR Capital Corp. (NASDAQ:FSK) based on that data.

Is FSK a good stock to buy now? FS KKR Capital Corp. (NASDAQ:FSK) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds’ portfolios at the end of September. Our calculations also showed that FSK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare FSK to other stocks including Sprout Social, Inc. (NASDAQ:SPT), Osisko Gold Royalties Ltd (NYSE:OR), and Tower Semiconductor Ltd. (NASDAQ:TSEM) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are plenty of indicators investors have at their disposal to value their holdings. A duo of the less known indicators are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can beat the S&P 500 by a solid margin (see the details here).

Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to review the recent hedge fund action regarding FS KKR Capital Corp. (NASDAQ:FSK).

Do Hedge Funds Think FSK Is A Good Stock To Buy Now?

At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in FSK a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Beach Point Capital Management, managed by Carl Goldsmith and Scott Klein, holds the largest position in FS KKR Capital Corp. (NASDAQ:FSK). Beach Point Capital Management has a $68 million position in the stock, comprising 30% of its 13F portfolio. Sitting at the No. 2 spot is Dorset Management, managed by David M. Knott, which holds a $6.3 million position; 3.7% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism comprise Robert B. Gillam’s McKinley Capital Management, James Morrow’s Callodine Capital Management and Gifford Combs’s Dalton Investments. In terms of the portfolio weights assigned to each position Beach Point Capital Management allocated the biggest weight to FS KKR Capital Corp. (NASDAQ:FSK), around 30.01% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, dishing out 3.68 percent of its 13F equity portfolio to FSK.

Judging by the fact that FS KKR Capital Corp. (NASDAQ:FSK) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds who sold off their full holdings in the third quarter. Interestingly, D. E. Shaw’s D E Shaw sold off the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth an estimated $2 million in stock. Phillip Goldstein, Andrew Dakos and Steven Samuels’s fund, Bulldog Investors, also dropped its stock, about $0.9 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as FS KKR Capital Corp. (NASDAQ:FSK) but similarly valued. We will take a look at Sprout Social, Inc. (NASDAQ:SPT), Osisko Gold Royalties Ltd (NYSE:OR), Tower Semiconductor Ltd. (NASDAQ:TSEM), Olin Corporation (NYSE:OLN), Eidos Therapeutics, Inc. (NASDAQ:EIDX), Main Street Capital Corporation (NYSE:MAIN), and Allegiant Travel Company (NASDAQ:ALGT). All of these stocks’ market caps are similar to FSK’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $248 million. That figure was $89 million in FSK’s case. Olin Corporation (NYSE:OLN) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 4 bullish hedge fund positions. FS KKR Capital Corp. (NASDAQ:FSK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FSK is 28.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on FSK as the stock returned 17.2% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.