Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about KBR, Inc. (NYSE:KBR).
KBR, Inc. (NYSE:KBR) has seen a decrease in enthusiasm from smart money of late. KBR was in 19 hedge funds’ portfolios at the end of the third quarter of 2018. There were 21 hedge funds in our database with KBR holdings at the end of the previous quarter. Our calculations also showed that KBR isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the key hedge fund action surrounding KBR, Inc. (NYSE:KBR).
Hedge fund activity in KBR, Inc. (NYSE:KBR)
At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards KBR over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Huber Capital Management was the largest shareholder of KBR, Inc. (NYSE:KBR), with a stake worth $114 million reported as of the end of September. Trailing Huber Capital Management was Citadel Investment Group, which amassed a stake valued at $82.7 million. Pzena Investment Management, AQR Capital Management, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since KBR, Inc. (NYSE:KBR) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of money managers who sold off their full holdings in the third quarter. Intriguingly, Brian Gustavson and Andrew Haley’s 1060 Capital Management cut the largest position of the 700 funds tracked by Insider Monkey, valued at close to $15.7 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dumped about $12.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to KBR, Inc. (NYSE:KBR). These stocks are Strategic Education, Inc. (NASDAQ:STRA), Houlihan Lokey Inc (NYSE:HLI), Jagged Peak Energy Inc. (NYSE:JAG), and LendingTree, Inc (NASDAQ:TREE). All of these stocks’ market caps are similar to KBR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STRA | 15 | 255963 | 3 |
| HLI | 14 | 205633 | -4 |
| JAG | 15 | 93556 | 5 |
| TREE | 18 | 69523 | -1 |
| Average | 15.5 | 156169 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $156 million. That figure was $491 million in KBR’s case. LendingTree, Inc (NASDAQ:TREE) is the most popular stock in this table. On the other hand Houlihan Lokey Inc (NYSE:HLI) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks KBR, Inc. (NYSE:KBR) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
