It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Korn/Ferry International (NYSE:KFY) .
Korn/Ferry International (NYSE:KFY) has experienced a decrease in activity from the world’s largest hedge funds in recent months. KFY was in 9 hedge funds’ portfolios at the end of the third quarter of 2016. There were 13 hedge funds in our database with KFY positions at the end of the previous quarter. At the end of this article we will also compare KFY to other stocks including Euronav NV Ordinary Shares (NYSE:EURN), La-Z-Boy Incorporated (NYSE:LZB), and Magnetek Inc (NASDAQ:MAG) 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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Keeping this in mind, let’s review the latest action regarding Korn/Ferry International (NYSE:KFY).
How are hedge funds trading Korn/Ferry International (NYSE:KFY)?
Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 31% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in KFY heading into this year. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in Korn/Ferry International (NYSE:KFY), worth close to $51.7 million, amounting to 0.3% of its total 13F portfolio. Coming in second is Lakewood Capital Management, led by Anthony Bozza, which holds a $29.6 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Millennium Management, one of the biggest hedge funds in the world, Joel Greenblatt’s Gotham Asset Management and D. E. Shaw’s D E Shaw. We should note that none of these hedge funds 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.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that sold off their entire stakes in the stock during the third quarter. Intriguingly, Marc Majzner’s Clearline Capital sold off the largest stake of all the investors tracked by Insider Monkey, valued at about $1.9 million in stock. Sahm Adrangi’s fund, Kerrisdale Capital, also sold off its stock, about $1.8 million worth.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Korn/Ferry International (NYSE:KFY) but similarly valued. We will take a look at Euronav NV Ordinary Shares (NYSE:EURN), La-Z-Boy Incorporated (NYSE:LZB), Magnetek Inc(NASDAQ:MAG), and Opus Bank (NASDAQ:OPB). This group of stocks’ market values resemble KFY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EURN | 14 | 79877 | -4 |
| LZB | 18 | 64304 | -1 |
| MAG | 13 | 51804 | 0 |
| OPB | 10 | 263294 | -3 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $92 million in KFY’s case. La-Z-Boy Incorporated (NYSE:LZB) is the most popular stock in this table. On the other hand Opus Bank (NASDAQ:OPB) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Korn/Ferry International (NYSE:KFY) is even less popular than OPB. 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
