At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
KEMET Corporation (NYSE:KEM) investors should be aware of an increase in enthusiasm from smart money of late. KEM was in 8 hedge funds’ portfolios at the end of September. There were 6 hedge funds in our database with KEM positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Dawson Geophysical Company (NASDAQ:DWSN), JTH Holding Inc (NASDAQ:TAX), and GlycoMimetics Inc (NASDAQ:GLYC) to gather more data points.
Follow Kemet Corp (NYSE:KEM)
Follow Kemet Corp (NYSE:KEM)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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With all of this in mind, we’re going to take a look at the fresh action regarding KEMET Corporation (NYSE:KEM).
What have hedge funds been doing with KEMET Corporation (NYSE:KEM)?
Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a jump of 33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in KEM over the last 5 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Royce & Associates, led by Chuck Royce, holds the number one position in KEMET Corporation (NYSE:KEM). According to regulatory filings, the fund has a $12.9 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Peter Algert and Kevin Coldiron of Algert Coldiron Investors, with a $1.2 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions consist of Jim Simons’s Renaissance Technologies, D. E. Shaw’s D E Shaw and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, key money managers were breaking ground themselves. Millennium Management, one of the 10 largest hedge funds in the world, assembled the biggest position in KEMET Corporation (NYSE:KEM). The fund reportedly had $0.1 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new KEM position is Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as KEMET Corporation (NYSE:KEM) but similarly valued. These stocks are Dawson Geophysical Company (NASDAQ:DWSN), JTH Holding Inc (NASDAQ:TAX), GlycoMimetics Inc (NASDAQ:GLYC), and Collectors Universe, Inc. (NASDAQ:CLCT). This group of stocks’ market valuations match KEM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DWSN | 6 | 26786 | 0 |
| TAX | 5 | 24517 | -2 |
| GLYC | 4 | 23085 | -2 |
| CLCT | 4 | 17945 | 0 |
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $16 million in KEM’s case. Dawson Geophysical Company (NASDAQ:DWSN) is the most popular stock in this table. On the other hand GlycoMimetics Inc (NASDAQ:GLYC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks KEMET Corporation (NYSE:KEM) 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.
