Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Kohl’s Corporation (NYSE:KSS)? The smart money sentiment can provide an answer to this question.
Hedge fund interest in Kohl’s Corporation (NYSE:KSS) 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 KSS to other stocks including Yandex NV (NASDAQ:YNDX), Alliant Energy Corporation (NYSE:LNT), and InterContinental Hotels Group PLC (NYSE:IHG) to get a better sense of its popularity.
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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s review the key hedge fund action regarding Kohl’s Corporation (NYSE:KSS).
What does the smart money think about Kohl’s Corporation (NYSE:KSS)?
Heading into the second quarter of 2019, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KSS over the last 15 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Kohl’s Corporation (NYSE:KSS) was held by AQR Capital Management, which reported holding $464.1 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $332.8 million position. Other investors bullish on the company included Millennium Management, Samlyn Capital, and Two Sigma Advisors.
Seeing as Kohl’s Corporation (NYSE:KSS) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there were a few funds that slashed their full holdings heading into Q3. It’s worth mentioning that Robert Pohly’s Samlyn Capital said goodbye to the largest stake of the 700 funds tracked by Insider Monkey, comprising close to $13.4 million in stock, and Stanley Druckenmiller’s Duquesne Capital was right behind this move, as the fund dumped about $9.8 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Kohl’s Corporation (NYSE:KSS) but similarly valued. These stocks are Yandex NV (NASDAQ:YNDX), Alliant Energy Corporation (NASDAQ:LNT), InterContinental Hotels Group PLC (NYSE:IHG), and DENTSPLY SIRONA Inc. (NASDAQ:XRAY). This group of stocks’ market caps match KSS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| YNDX | 30 | 843757 | 7 |
| LNT | 17 | 608429 | -11 |
| IHG | 5 | 21218 | -2 |
| XRAY | 31 | 1834188 | 4 |
| Average | 20.75 | 826898 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $827 million. That figure was $1189 million in KSS’s case. DENTSPLY SIRONA Inc. (NASDAQ:XRAY) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 5 bullish hedge fund positions. Kohl’s Corporation (NYSE:KSS) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately KSS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on KSS were disappointed as the stock returned -26.9% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
