A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on The Kroger Co. (NYSE:KR).
Is KR stock a buy? The Kroger Co. (NYSE:KR) was in 36 hedge funds’ portfolios at the end of December. The all time high for this statistic is 46. KR shareholders have witnessed an increase in support from the world’s most elite money managers of late. There were 35 hedge funds in our database with KR positions at the end of the third quarter. Our calculations also showed that KR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Cliff Asness of AQR Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a peek at the recent hedge fund action regarding The Kroger Co. (NYSE:KR).
Do Hedge Funds Think KR Is A Good Stock To Buy Now?
At fourth quarter’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. On the other hand, there were a total of 31 hedge funds with a bullish position in KR a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the largest position in The Kroger Co. (NYSE:KR). Berkshire Hathaway has a $1.065 billion position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, which holds a $782.8 million position; 0.9% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions contain Cliff Asness’s AQR Capital Management, Dmitry Balyasny’s Balyasny Asset Management and Jeremy Hosking’s Hosking Partners. In terms of the portfolio weights assigned to each position Game Creek Capital allocated the biggest weight to The Kroger Co. (NYSE:KR), around 4.4% of its 13F portfolio. Te Ahumairangi Investment Management is also relatively very bullish on the stock, designating 2.36 percent of its 13F equity portfolio to KR.
Consequently, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, created the biggest position in The Kroger Co. (NYSE:KR). Balyasny Asset Management had $56.2 million invested in the company at the end of the quarter. Nicholas Bagnall’s Te Ahumairangi Investment Management also initiated a $16.9 million position during the quarter. The following funds were also among the new KR investors: Michael A. Price and Amos Meron’s Empyrean Capital Partners, Mark Coe’s Coe Capital Management, and Farnum Brown and Adam Seitchik’s Arjuna Capital.
Let’s now review hedge fund activity in other stocks similar to The Kroger Co. (NYSE:KR). These stocks are Fortinet Inc (NASDAQ:FTNT), Cerner Corporation (NASDAQ:CERN), Alexandria Real Estate Equities Inc (NYSE:ARE), BeiGene, Ltd. (NASDAQ:BGNE), Yum China Holdings, Inc. (NYSE:YUMC), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), and Franco-Nevada Corporation (NYSE:FNV). All of these stocks’ market caps match KR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FTNT | 32 | 1220671 | -4 |
| CERN | 34 | 834428 | 0 |
| ARE | 14 | 198522 | -11 |
| BGNE | 21 | 4659391 | 8 |
| YUMC | 39 | 1317170 | 0 |
| TTWO | 55 | 1513003 | 3 |
| FNV | 27 | 1224140 | -4 |
| Average | 31.7 | 1566761 | -1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.7 hedge funds with bullish positions and the average amount invested in these stocks was $1567 million. That figure was $2381 million in KR’s case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Alexandria Real Estate Equities Inc (NYSE:ARE) is the least popular one with only 14 bullish hedge fund positions. The Kroger Co. (NYSE:KR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KR is 56.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on KR as the stock returned 13.8% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Kroger Co (NYSE:KR)
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Disclosure: None. This article was originally published at Insider Monkey.
