Is Kemper Corporation (KMPR) Going to Burn These Hedge Funds?

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.

Kemper Corporation (NYSE:KMPR) has seen a decrease in hedge fund sentiment of late. 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 InterDigital, Inc. (NASDAQ:IDCC), Evercore Partners Inc. (NYSE:EVR), and COMSCORE, Inc. (NASDAQ:SCOR) to gather more data points.

In the 21st century investor’s toolkit, there are tons of indicators market participants use to assess stocks. A duo of the most under-the-radar indicators are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top fund managers can outpace the S&P 500 by a superb margin (see the details here).

Keeping this in mind, we’re going to go over the key action surrounding Kemper Corporation (NYSE:KMPR).

What does the smart money think about Kemper Corporation (NYSE:KMPR)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 14% from the previous quarter. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the largest position in Kemper Corporation (NYSE:KMPR), worth close to $6.5 million, accounting for less than 0.1% of its total 13F portfolio. On Arrowstreet Capital’s heels is Citadel Investment Group, led by Ken Griffin, holding a $2.6 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish encompass Renaissance Technologies, Michael Price’s MFP Investors, and Israel Englander’s Millennium Management.

Since Kemper Corporation (NYSE:KMPR) has witnessed a bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers who sold off their positions entirely in the third quarter. At the top of the heap, Alec Litowitz and Ross Laser’s Magnetar Capital sold off the biggest position of all the hedgies tracked by Insider Monkey, worth an estimated $0.5 million in stock, and Cliff Asness’ AQR Capital Management was right behind this move, as the fund sold off about $0.5 million worth of shares. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 fund in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Kemper Corporation (NYSE:KMPR) but similarly valued. These stocks are InterDigital, Inc. (NASDAQ:IDCC), Evercore Partners Inc. (NYSE:EVR), COMSCORE, Inc. (NASDAQ:SCOR), and Boyd Gaming Corporation (NYSE:BYD). This group of stocks’ market values is similar to Kemper Corporation (NYSE:KMPR)’s market value.

As you can see, these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $264 million. That figure was $10 million in Kemper Corporation (NYSE:KMPR)’s case. COMSCORE, Inc. (NASDAQ:SCOR) is the most popular stock in this table. On the other hand, InterDigital, Inc. (NASDAQ:IDCC) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks, Kemper Corporation (NYSE:KMPR) is even less popular than InterDigital, Inc. (NASDAQ:IDCC). 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.