Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year through May 30th (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Koppers Holdings Inc. (NYSE:KOP).
Koppers Holdings Inc. (NYSE:KOP) investors should be aware of an increase in support from the world’s most elite money managers recently. Our calculations also showed that KOP isn’t among the 30 most popular stocks among hedge funds.
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 check out the fresh hedge fund action regarding Koppers Holdings Inc. (NYSE:KOP).
What have hedge funds been doing with Koppers Holdings Inc. (NYSE:KOP)?
At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in KOP over the last 15 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Mountain Lake Investment Management was the largest shareholder of Koppers Holdings Inc. (NYSE:KOP), with a stake worth $17 million reported as of the end of March. Trailing Mountain Lake Investment Management was Millennium Management, which amassed a stake valued at $8.3 million. D E Shaw, Venator Capital Management, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Venator Capital Management, managed by Brandon Osten, established the largest position in Koppers Holdings Inc. (NYSE:KOP). Venator Capital Management had $2.7 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $2.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, D. E. Shaw’s D E Shaw, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s check out hedge fund activity in other stocks similar to Koppers Holdings Inc. (NYSE:KOP). We will take a look at The First Bancshares, Inc. (NASDAQ:FBMS), QCR Holdings, Inc. (NASDAQ:QCRH), A10 Networks Inc (NYSE:ATEN), and AVROBIO, Inc. (NASDAQ:AVRO). This group of stocks’ market values are similar to KOP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FBMS | 8 | 29781 | 3 |
| QCRH | 10 | 58309 | 1 |
| ATEN | 18 | 95129 | 1 |
| AVRO | 4 | 66404 | -2 |
| Average | 10 | 62406 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $41 million in KOP’s case. A10 Networks Inc (NYSE:ATEN) is the most popular stock in this table. On the other hand AVROBIO, Inc. (NASDAQ:AVRO) is the least popular one with only 4 bullish hedge fund positions. Koppers Holdings Inc. (NYSE:KOP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on KOP as the stock returned 10.9% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
