Is KEY A Good Stock To Buy According To Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of KeyCorp (NYSE:KEY) based on that data.

Is KEY a good stock to buy? KeyCorp (NYSE:KEY) investors should pay attention to a decrease in hedge fund interest recently. KeyCorp (NYSE:KEY) was in 33 hedge funds’ portfolios at the end of September. The all time high for this statistic is 46. Our calculations also showed that KEY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bruce Kovner of Caxton Associates LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Now we’re going to check out the key hedge fund action regarding KeyCorp (NYSE:KEY).

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

Heading into the fourth quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KEY over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

The largest stake in KeyCorp (NYSE:KEY) was held by Adage Capital Management, which reported holding $67.9 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $55.5 million position. Other investors bullish on the company included Sirios Capital Management, Holocene Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position Sirios Capital Management allocated the biggest weight to KeyCorp (NYSE:KEY), around 2.41% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, setting aside 1.17 percent of its 13F equity portfolio to KEY.

Because KeyCorp (NYSE:KEY) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of hedgies that slashed their entire stakes last quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management sold off the largest position of all the hedgies monitored by Insider Monkey, totaling an estimated $19.9 million in stock, and Gregg Moskowitz’s Interval Partners was right behind this move, as the fund sold off about $3.6 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to KeyCorp (NYSE:KEY). These stocks are United Microelectronics Corp (NYSE:UMC), ONEOK, Inc. (NYSE:OKE), Dr. Reddy’s Laboratories Limited (NYSE:RDY), Dynatrace, Inc. (NYSE:DT), Evergy, Inc. (NYSE:EVRG), Open Text Corporation (NASDAQ:OTEX), and Whirlpool Corporation (NYSE:WHR). All of these stocks’ market caps resemble KEY’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $606 million. That figure was $249 million in KEY’s case. Dynatrace, Inc. (NYSE:DT) is the most popular stock in this table. On the other hand United Microelectronics Corp (NYSE:UMC) is the least popular one with only 11 bullish hedge fund positions. KeyCorp (NYSE:KEY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KEY is 54. 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. 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 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on KEY as the stock returned 30.7% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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