The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS).
Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) has experienced an increase in hedge fund sentiment lately. KTOS was in 10 hedge funds’ portfolios at the end of the third quarter of 2016. There were 9 hedge funds in our database with KTOS positions at the end of the second quarter. At the end of this article we will also compare KTOS to other stocks including Carbonite Inc (NASDAQ:CARB), QCR Holdings, Inc. (NASDAQ:QCRH), and Federal Agricultural Mortgage Corp. (NYSE:AGM) to get a better sense of its popularity.
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How are hedge funds trading Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a boost of 11% from one quarter earlier. By comparison, 6 hedge funds held shares or bullish call options in KTOS heading into this year, which has since risen by 66%. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce of Royce & Associates holds the most valuable position in Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), owning a $23.4 million position in the stock. The second most bullish fund manager is Millennium Management, one of the 10 largest hedge funds in the world, with a $13.2 million position. Some other professional money managers that are bullish encompass David E. Shaw’s D E Shaw, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Ken Griffin’s Citadel Investment Group. 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-micro-cap stocks.
As one would reasonably expect, some big names have jumped into Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) headfirst. Citadel Investment Group created the largest position in Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), holding a $0.5 million invested in the company at the end of the third quarter. Joshua Packwood and Schuster Tanger’s Radix Partners also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock was Mike Vranos’ Ellington.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) but similarly valued. We will take a look at Carbonite Inc (NASDAQ:CARB), QCR Holdings, Inc. (NASDAQ:QCRH), Federal Agricultural Mortgage Corp. (NYSE:AGM), and Suffolk Bancorp (NYSE:SCNB). This group of stocks’ market values are similar to KTOS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CARB | 22 | 144009 | -1 |
| QCRH | 6 | 47154 | -1 |
| AGM | 8 | 17262 | 2 |
| SCNB | 7 | 45085 | -4 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $42 million in KTOS’s case. Carbonite Inc (NASDAQ:CARB) is the most popular stock in this table. On the other hand QCR Holdings, Inc. (NASDAQ:QCRH) is the least popular one with only 6 bullish hedge fund positions. Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CARB might be a better candidate to consider taking a long position in.
Disclosure: None
