We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Kennedy-Wilson Holdings Inc (NYSE:KW) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Kennedy-Wilson Holdings Inc (NYSE:KW) a sound stock to buy now? Hedge funds are in a bearish mood. The number of long hedge fund positions were trimmed by 2 recently. Our calculations also showed that KW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). KW was in 17 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 19 hedge funds in our database with KW positions at the end of the previous quarter.
To most investors, hedge funds are viewed as slow, outdated investment vehicles of yesteryear. While there are more than 8000 funds trading at present, Our researchers choose to focus on the crème de la crème of this group, about 850 funds. These money managers preside over the lion’s share of all hedge funds’ total capital, and by observing their inimitable stock picks, Insider Monkey has formulated several investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the fresh hedge fund action regarding Kennedy-Wilson Holdings Inc (NYSE:KW).
How have hedgies been trading Kennedy-Wilson Holdings Inc (NYSE:KW)?
At the end of the fourth quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KW over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Kennedy-Wilson Holdings Inc (NYSE:KW) was held by Fairfax Financial Holdings, which reported holding $296.7 million worth of stock at the end of September. It was followed by Elkhorn Partners with a $95.9 million position. Other investors bullish on the company included Royce & Associates, Sprott Asset Management, and Millennium Management. In terms of the portfolio weights assigned to each position Elkhorn Partners allocated the biggest weight to Kennedy-Wilson Holdings Inc (NYSE:KW), around 55.07% of its 13F portfolio. Fairfax Financial Holdings is also relatively very bullish on the stock, earmarking 11.69 percent of its 13F equity portfolio to KW.
Since Kennedy-Wilson Holdings Inc (NYSE:KW) has witnessed a decline in interest from the smart money, it’s safe to say that there were a few money managers that slashed their entire stakes last quarter. At the top of the heap, Richard S. Meisenberg’s ACK Asset Management cut the largest position of the “upper crust” of funds monitored by Insider Monkey, totaling about $4.2 million in stock, Renaissance Technologies was right behind this move, as the fund dumped about $2.5 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Kennedy-Wilson Holdings Inc (NYSE:KW) but similarly valued. These stocks are Allogene Therapeutics, Inc. (NASDAQ:ALLO), CONMED Corporation (NASDAQ:CNMD), Paramount Group Inc (NYSE:PGRE), and EnerSys (NYSE:ENS). This group of stocks’ market caps are closest to KW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALLO | 12 | 114946 | 6 |
| CNMD | 31 | 270901 | 7 |
| PGRE | 20 | 362031 | -2 |
| ENS | 13 | 71202 | -6 |
| Average | 19 | 204770 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $205 million. That figure was $509 million in KW’s case. CONMED Corporation (NASDAQ:CNMD) is the most popular stock in this table. On the other hand Allogene Therapeutics, Inc. (NASDAQ:ALLO) is the least popular one with only 12 bullish hedge fund positions. Kennedy-Wilson Holdings Inc (NYSE:KW) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately KW wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KW investors were disappointed as the stock returned -40.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
