Is Kronos Worldwide, Inc. (KRO) A Good Stock To Buy?

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 Kronos Worldwide, Inc. (NYSE:KRO).

Kronos Worldwide, Inc. (NYSE:KRO) was in 8 hedge funds’ portfolios at the end of September. KRO investors should pay attention to an increase in activity from the world’s largest hedge funds of late. There were 6 hedge funds in our database with KRO holdings at the end of June. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Team, Inc. (NYSE:TISI), Unit Corporation (NYSE:UNT), and Navigant Consulting, Inc. (NYSE:NCI) to gather more data points.

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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Hedge fund activity in Kronos Worldwide, Inc. (NYSE:KRO)

Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a gain of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KRO over the last 5 quarters, which has fluctuated within a narrow range of between 6 and 8 bullish positions. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Israel Englander’s Millennium Management has the number one position in Kronos Worldwide, Inc. (NYSE:KRO), worth close to $3.2 million. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $2.9 million position. Remaining professional money managers with similar optimism encompass Renaissance Technologies, Mark Coe’s Coe Capital Management, 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.

With general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Arrowstreet Capital established the most outsized position in Kronos Worldwide, Inc. (NYSE:KRO). Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also initiated a $0.3 million position during the quarter. The other funds with brand new KRO positions are Paul Marshall and Ian Wace’s Marshall Wace LLP and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s now review hedge fund activity in other stocks similar to Kronos Worldwide, Inc. (NYSE:KRO). These stocks are Team, Inc. (NYSE:TISI), Unit Corporation (NYSE:UNT), Navigant Consulting, Inc. (NYSE:NCI), and Cray Inc. (NASDAQ:CRAY). This group of stocks’ market values resemble KRO’s market value.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $11 million in KRO’s case. Unit Corporation (NYSE:UNT) is the most popular stock in this table. On the other hand Team, Inc. (NYSE:TISI) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Kronos Worldwide, Inc. (NYSE:KRO) is only as popular as TISI. 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.

Disclosure: None