Concerns over a shift in Fed’s easy monetary policy have hit several hedge funds hard during the third quarter. A number of sectors are in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25, 2015 and October 30, 2015. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards KKR & Co. L.P. (NYSE:KKR).
Hedge fund interest in KKR & Co. L.P. (NYSE:KKR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare KKR to other stocks including Mylan N.V. (NASDAQ:MYL), Ross Stores, Inc. (NASDAQ:ROST), and CRH PLC (ADR) (NYSE:CRH) to get a better sense of its popularity.
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Today there are a lot of formulas shareholders have at their disposal to assess publicly traded companies. Two of the less utilized formulas are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the best investment managers can outperform the market by a solid margin (see the details here).
With all of this in mind, we’re going to take a glance at the new action encompassing KKR & Co. L.P. (NYSE:KKR).
How have hedgies been trading KKR & Co. L.P. (NYSE:KKR)?
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Thomas E. Claugus’s GMT Capital has the biggest position in KKR & Co. L.P. (NYSE:KKR), worth close to $112.5 million, comprising 2.8% of its total 13F portfolio. Sitting at the No. 2 spot is Legg Mason Capital Management, managed by Bill Miller, which holds a $50 million position; 1% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism consist of Emanuel J. Friedman’s EJF Capital, Leon Cooperman’s Omega Advisors and Robert Joseph Caruso’s Select Equity Group.
Due to the fact that KKR & Co. L.P. (NYSE:KKR) has experienced declining sentiment from hedge fund managers, we can see that there exists a select few fund managers that slashed their entire stakes heading into Q4. At the top of the heap, Eric Halet and Davide Serra’s Algebris Investments dropped the biggest investment of all the hedgies monitored by Insider Monkey, worth about $11.1 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dumped about $6.4 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as KKR & Co. L.P. (NYSE:KKR) but similarly valued. These stocks are Mylan N.V. (NASDAQ:MYL), Ross Stores, Inc. (NASDAQ:ROST), CRH PLC (ADR) (NYSE:CRH), and Charter Communications, Inc. (NASDAQ:CHTR). This group of stocks’ market values resemble KKR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MYL | 74 | 2843316 | -18 |
| ROST | 40 | 908863 | 5 |
| CRH | 7 | 12060 | 4 |
| CHTR | 87 | 11260104 | -9 |
As you can see these stocks had an average of 52 hedge funds with bullish positions and the average amount invested in these stocks was $3756 million. That figure was $581 million in KKR’s case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand CRH PLC (ADR) (NYSE:CRH) is the least popular one with only 7 bullish hedge fund positions. KKR & Co. L.P. (NYSE:KKR), with 30 bullish hedge fund positions, 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 focusing on stocks that hedge funds are piling on. In this regard, CHTR might be a better candidate to consider a long position.
