While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Korea Electric Power Corporation (NYSE:KEP).
Is Korea Electric Power Corporation (NYSE:KEP) worth your attention right now? Money managers are turning less bullish. The number of bullish hedge fund bets shrunk by 1 lately. Our calculations also showed that KEP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). KEP was in 6 hedge funds’ portfolios at the end of September. There were 7 hedge funds in our database with KEP positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Bruce Kovner of Caxton Associates LP
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to go over the latest hedge fund action regarding Korea Electric Power Corporation (NYSE:KEP).
Hedge fund activity in Korea Electric Power Corporation (NYSE:KEP)
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in KEP a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Korea Electric Power Corporation (NYSE:KEP) was held by Kopernik Global Investors, which reported holding $24.2 million worth of stock at the end of September. It was followed by Orbis Investment Management with a $18.7 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Caxton Associates. In terms of the portfolio weights assigned to each position Kopernik Global Investors allocated the biggest weight to Korea Electric Power Corporation (NYSE:KEP), around 4.6% of its 13F portfolio. Orbis Investment Management is also relatively very bullish on the stock, setting aside 0.14 percent of its 13F equity portfolio to KEP.
Seeing as Korea Electric Power Corporation (NYSE:KEP) has witnessed bearish sentiment from hedge fund managers, we can see that there exists a select few hedge funds that decided to sell off their positions entirely last quarter. Interestingly, David E. Shaw’s D E Shaw sold off the largest position of all the hedgies tracked by Insider Monkey, comprising an estimated $0.4 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dumped its stock, about $0.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Korea Electric Power Corporation (NYSE:KEP) but similarly valued. These stocks are KB Financial Group, Inc. (NYSE:KB), Freeport-McMoRan Inc. (NYSE:FCX), Seattle Genetics, Inc. (NASDAQ:SGEN), and Cardinal Health, Inc. (NYSE:CAH). All of these stocks’ market caps match KEP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KB | 7 | 45753 | -2 |
| FCX | 37 | 1012669 | 4 |
| SGEN | 27 | 4587575 | 10 |
| CAH | 25 | 776365 | -3 |
| Average | 24 | 1605591 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $1606 million. That figure was $44 million in KEP’s case. Freeport-McMoRan Inc. (NYSE:FCX) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Korea Electric Power Corporation (NYSE:KEP) is even less popular than KB. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on KEP, though not to the same extent, as the stock returned 8.7% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
