Hedge funds are not perfect. They have their bad picks just like everyone else. Valeant, a stock hedge funds have loved, lost 79% during the last 12 months ending in November 21. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 mid-cap stocks among the best performing hedge funds yielded an average return of 18% in the same time period, vs. a gain of 7.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the successful funds think of Korea Electric Power Corporation (ADR) (NYSE:KEP).
Korea Electric Power Corporation (ADR) (NYSE:KEP) was in 14 hedge funds’ portfolios at the end of the third quarter of 2016. KEP investors should be aware of an increase in support from the world’s most successful money managers lately. There were 13 hedge funds in our database with KEP positions at the end of the previous quarter. At the end of this article we will also compare KEP to other stocks including Constellation Brands, Inc. (NYSE:STZ), Twenty-First Century Fox Inc (NASDAQ:FOXA), and CME Group Inc (NASDAQ:CME) to get a better sense of its popularity.
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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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How are hedge funds trading Korea Electric Power Corporation (ADR) (NYSE:KEP)?
Heading into the fourth quarter of 2016, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, up by 8% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in KEP at the beginning of this year. 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).
When looking at the institutional investors followed by Insider Monkey, Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in Korea Electric Power Corporation (ADR) (NYSE:KEP). Arrowstreet Capital has a $90.1 million position in the stock. The second most bullish fund manager is Orbis Investment Management, led by William B. Gray, holding a $14.7 million position. Other professional money managers with similar optimism consist of David Kowitz and Sheldon Kasowitz’s Indus Capital, Robert B. Gillam’s McKinley Capital Management and Millennium Management, one of the 10 largest hedge funds in the world. We should note that two of these hedge funds (Orbis Investment Management and Indus Capital) are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As aggregate interest increased, key hedge funds were breaking ground themselves. D E Shaw, led by D. E. Shaw, created the largest position in Korea Electric Power Corporation (ADR) (NYSE:KEP). D E Shaw had $1.6 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $0.7 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management and J. Alan Reid, Jr.’s Forward Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Korea Electric Power Corporation (ADR) (NYSE:KEP) but similarly valued. These stocks are Constellation Brands, Inc. (NYSE:STZ), Twenty-First Century Fox Inc (NASDAQ:FOXA), CME Group Inc (NASDAQ:CME), and CIGNA Corporation (NYSE:CI). All of these stocks’ market caps are closest to KEP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STZ | 67 | 6679779 | -2 |
| FOXA | 48 | 3558064 | -1 |
| CME | 48 | 980224 | -1 |
| CI | 55 | 3154370 | -4 |
As you can see these stocks had an average of 55 hedge funds with bullish positions and the average amount invested in these stocks was $3.6 billion. That figure was $126 million in KEP’s case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand Twenty-First Century Fox Inc (NASDAQ:FOXA) is the least popular one with only 48 bullish hedge fund positions. Compared to these stocks Korea Electric Power Corporation (ADR) (NYSE:KEP) is even less popular than FOXA. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
