It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in iKang Healthcare Group Inc (ADR) (NASDAQ:KANG).
Is iKang Healthcare Group Inc (ADR) (NASDAQ:KANG) a bargain? The best stock pickers are taking a bearish view. The number of bullish hedge fund positions retreated by 5 recently. The trading environment surrounding iKang Healthcare Group Inc (ADR) (NASDAQ:KANG) shared a similar sentiment, with the stock losing 23.47% value throughout the quarter.
To find out more about the hedge fund behavior, we will also compare iKang Healthcare Group Inc (ADR) (NASDAQ:KANG) to other stocks including Bob Evans Farms Inc (NASDAQ:BOBE), Ingles Markets, Incorporated (NASDAQ:IMKTA), and Caesars Acquisition Company (NASDAQ:CACQ) to get a better sense of its popularity.
Today, there are numerous tools market participants employ to evaluate publicly traded companies. A couple of the less known tools are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best investment managers can beat the broader indices by a healthy margin (see the details here).
Now, we’re going to take a look at the new action surrounding iKang Healthcare Group Inc (ADR) (NASDAQ:KANG).
What does the smart money think about iKang Healthcare Group Inc (ADR) (NASDAQ:KANG)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 38% from the previous quarter. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Robert Karr’s Joho Capital has the biggest position in iKang Healthcare Group Inc (ADR) (NASDAQ:KANG), worth close to $19.1 million, amounting to 5.5% of its total 13F portfolio. Sitting at the No. 2 spot is OZ Management, managed by Daniel S. Och, which holds a $11.7 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining peers that are bullish contain Jacob Gottlieb’s Visium Asset Management, James Dondero’s Highland Capital Management, and Howard Marks’ Oaktree Capital Management.
Because iKang Healthcare Group Inc (ADR) (NASDAQ:KANG) has experienced a falling interest from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds who sold off their positions entirely heading into Q4. At the top of the heap, Brian Taylor’s Pine River Capital Management dumped the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising close to $13.5 million in stock. Jeffrey Altman’s fund, Owl Creek Asset Management, also said goodbye to its stock, about $12 million worth of shares. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 5 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to iKang Healthcare Group Inc (ADR) (NASDAQ:KANG). We will take a look at Bob Evans Farms Inc (NASDAQ:BOBE), Ingles Markets, Incorporated (NASDAQ:IMKTA), Caesars Acquisition Company (NASDAQ:CACQ), and SpartanNash Co (NASDAQ:SPTN). This group of stocks’ market values are similar to iKang Healthcare Group Inc (ADR) (NASDAQ:KANG)’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BOBE | 22 | 238940 | 4 |
| IMKTA | 11 | 95460 | -3 |
| CACQ | 13 | 212974 | 3 |
| SPTN | 18 | 69269 | 1 |
As you can see, these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $154 million. That figure was $39 million in iKang Healthcare Group Inc (ADR) (NASDAQ:KANG)’s case. Bob Evans Farms Inc (NASDAQ:BOBE) is the most popular stock in this table. On the other hand, Ingles Markets, Incorporated (NASDAQ:IMKTA) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks, iKang Healthcare Group Inc (ADR) (NASDAQ:KANG) is even less popular than Ingles Markets, Incorporated (NASDAQ:IMKTA). 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.