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 KCG Holdings, Inc. Class A (NYSE:KCG).
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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How are hedge funds trading KCG Holdings, Inc. Class A (NYSE:KCG)?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, down by 13% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in KCG heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Interval Partners, led by Gregg Moskowitz, holds the largest position in KCG Holdings, Inc. Class A (NYSE:KCG). Interval Partners has a $13 million position in the stock. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $12.7 million position. Other members of the smart money with similar optimism comprise D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Shane Finemore’s Manikay Partners. 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.
Seeing as KCG Holdings, Inc. Class A (NYSE:KCG) has sustained falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds who sold off their full holdings heading into Q4. It’s worth mentioning that Israel Englander’s Millennium Management dumped the largest investment of the 700 funds tracked by Insider Monkey, comprising close to $1.6 million in stock.
Let’s go over hedge fund activity in other stocks similar to KCG Holdings, Inc. Class A (NYSE:KCG). These stocks are Mobile Mini Inc (NASDAQ:MINI), Otter Tail Corporation (NASDAQ:OTTR), CSG Systems International, Inc. (NASDAQ:CSGS), and TherapeuticsMD Inc (OTC:TXMD). This group of stocks’ market caps are similar to KCG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MINI | 8 | 55249 | -1 |
| OTTR | 8 | 31703 | -3 |
| CSGS | 16 | 157761 | -3 |
| TXMD | 13 | 56897 | 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 $75 million. That figure was $67 million in KCG’s case. CSG Systems International, Inc. (NASDAQ:CSGS) is the most popular stock in this table. On the other hand Mobile Mini Inc (NASDAQ:MINI) is the least popular one with only 8 bullish hedge fund positions. KCG Holdings, Inc. Class A (NYSE:KCG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CSGS might be a better candidate to consider taking a long position in.
Disclosure: None
