Is KEP Stock A Buy Here?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Korea Electric Power Corporation (NYSE:KEP).

Is KEP stock a buy? Prominent investors were becoming less confident. The number of bullish hedge fund positions fell by 3 lately. Korea Electric Power Corporation (NYSE:KEP) was in 4 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 14. Our calculations also showed that KEP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Iben of Kopernik Global Investors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a gander at the key hedge fund action surrounding Korea Electric Power Corporation (NYSE:KEP).

Do Hedge Funds Think KEP Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -43% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in KEP over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, David Iben’s Kopernik Global Investors has the number one position in Korea Electric Power Corporation (NYSE:KEP), worth close to $16.8 million, comprising 1.9% of its total 13F portfolio. On Kopernik Global Investors’s heels is holding a $2.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that hold long positions encompass Ken Griffin’s Citadel Investment Group, D. E. Shaw’s D E Shaw and . In terms of the portfolio weights assigned to each position Kopernik Global Investors allocated the biggest weight to Korea Electric Power Corporation (NYSE:KEP), around 1.89% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0026 percent of its 13F equity portfolio to KEP.

Judging by the fact that Korea Electric Power Corporation (NYSE:KEP) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies that decided to sell off their entire stakes in the first quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP cut the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth close to $0.4 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund said goodbye to about $0.3 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 3 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Korea Electric Power Corporation (NYSE:KEP). These stocks are iQIYI, Inc. (NASDAQ:IQ), Crown Holdings, Inc. (NYSE:CCK), Oak Street Health, Inc. (NYSE:OSH), The Carlyle Group Inc (NASDAQ:CG), UDR, Inc. (NYSE:UDR), Open Text Corporation (NASDAQ:OTEX), and Icahn Enterprises LP (NASDAQ:IEP). This group of stocks’ market values are similar to KEP’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $2425 million. That figure was $19 million in KEP’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Icahn Enterprises LP (NASDAQ:IEP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Korea Electric Power Corporation (NYSE:KEP) is even less popular than IEP. Our overall hedge fund sentiment score for KEP is 10.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on KEP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on KEP as the stock returned 14.3% since Q1 (through June 11th) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.