Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: KLX Inc (NASDAQ:KLXI).
KLX Inc (NASDAQ:KLXI) was in 22 hedge funds’ portfolios at the end of September. KLXI shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. There were 23 hedge funds in our database with KLXI positions at the end of the previous quarter. At the end of this article we will also compare KLXI to other stocks including Coeur d’Alene Mines Corporation (NYSE:CDE), Itron, Inc. (NASDAQ:ITRI), and Financial Engines Inc (NASDAQ:FNGN) to get a better sense of its popularity.
Follow Klx Inc. (NASDAQ:KLXI)
Follow Klx Inc. (NASDAQ:KLXI)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Now, we’re going to take a look at the new action encompassing KLX Inc (NASDAQ:KLXI).
What does the smart money think about KLX Inc (NASDAQ:KLXI)?
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Thomas Steyer’s Farallon Capital has the largest position in KLX Inc (NASDAQ:KLXI), worth close to $99.4 million, accounting for 1.5% of its total 13F portfolio. The second largest stake is held by Baupost Group, led by Seth Klarman, holding a $70.4 million position; 1% of its 13F portfolio is allocated to the company. Other peers that are bullish consist of Robert Pohly’s Samlyn Capital, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management.
Judging by the fact that KLX Inc (NASDAQ:KLXI) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who were dropping their positions entirely last quarter. Intriguingly, Richard S. Meisenberg’s ACK Asset Management dumped the largest stake of the 700 funds tracked by Insider Monkey, valued at close to $5.4 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also sold off its stock, about $1.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to KLX Inc (NASDAQ:KLXI). These stocks are Coeur d’Alene Mines Corporation (NYSE:CDE), Itron, Inc. (NASDAQ:ITRI), Financial Engines Inc (NASDAQ:FNGN), and Magellan Health Services Inc (NASDAQ:MGLN). This group of stocks’ market values are similar to KLXI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CDE | 26 | 286956 | 5 |
| ITRI | 19 | 447778 | 3 |
| FNGN | 13 | 48815 | 2 |
| MGLN | 19 | 198682 | -2 |
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $246 million. That figure was $423 million in KLXI’s case. Coeur d’Alene Mines Corporation (NYSE:CDE) is the most popular stock in this table. On the other hand Financial Engines Inc (NASDAQ:FNGN) is the least popular one with only 13 bullish hedge fund positions. KLX Inc (NASDAQ:KLXI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CDE might be a better candidate to consider a long position.
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Disclosure: None
