Is Key Technology, Inc. (KTEC) A Good Stock To Buy?

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Key Technology, Inc. (NASDAQ:KTEC).

Key Technology, Inc. (NASDAQ:KTEC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of the third quarter of 2015. At the end of this article we will also compare KTEC to other stocks including Vuzix Corporation (NASDAQ:VUZI), bebe stores, inc. (NASDAQ:BEBE), and Universal Stainless & Alloy Products (NASDAQ:USAP) to get a better sense of its popularity.

If you’d ask most traders, hedge funds are seen as slow, old financial vehicles of years past. While there are greater than 8000 funds in operation at present, Our experts hone in on the aristocrats of this group, about 700 funds. These investment experts direct the majority of the hedge fund industry’s total capital, and by tracking their first-class picks, Insider Monkey has deciphered numerous investment strategies that have historically outpaced the broader indices. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.

With all of this in mind, let’s review the latest action encompassing Key Technology, Inc. (NASDAQ:KTEC).

What does the smart money think about Key Technology, Inc. (NASDAQ:KTEC)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter. With hedge funds’ sentiment swirling, there exist a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the most valuable position in Key Technology, Inc. (NASDAQ:KTEC), worth close to $9.2 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Peter Schliemann of Rutabaga Capital Management, with a $2.8 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions include Jim Simons’s Renaissance Technologies, and Mario Gabelli’s GAMCO Investors.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s check out hedge fund activity in other stocks similar to Key Technology, Inc. (NASDAQ:KTEC). We will take a look at Vuzix Corporation (NASDAQ:VUZI), bebe stores, inc. (NASDAQ:BEBE), Universal Stainless & Alloy Products (NASDAQ:USAP), and Tandy Leather Factory, Inc. (NASDAQ:TLF). All of these stocks’ market caps resemble KTEC’s market cap.

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 $15 million. That figure was $14 million in KTEC’s case. The least popular stocks in this table are bebe stores, inc. (NASDAQ:BEBE) and Tandy Leather Factory, Inc. (NASDAQ:TLF), while the most popular one is Vuzix Corporation (NASDAQ:VUZI). Key Technology, Inc. (NASDAQ:KTEC) has the same number of bullish hedge fund positions as the least popular stocks in this table – BEBE and TLF. To understand why the smart money isn’t behind this stock, further research is needed. This doesn’t necessarily mean it is not a good stock to buy; it is also possible that investors thought of it as overvalued because they weren’t considering the bullish thesis. In either case, more research is warranted.