In this article we are going to use hedge fund sentiment as a tool and determine whether Kraton Corporation (NYSE:KRA) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Kraton Corporation (NYSE:KRA) was in 20 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 28. KRA shareholders have witnessed an increase in support from the world’s most elite money managers lately. There were 18 hedge funds in our database with KRA holdings at the end of December. Our calculations also showed that KRA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In today’s marketplace there are plenty of gauges shareholders use to grade stocks. A duo of the most under-the-radar gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace the market by a healthy margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Sander Gerber of Hudson Bay Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind let’s check out the key hedge fund action encompassing Kraton Corporation (NYSE:KRA).
Do Hedge Funds Think KRA Is A Good Stock To Buy Now?
At first quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KRA over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Rubric Capital Management held the most valuable stake in Kraton Corporation (NYSE:KRA), which was worth $54.9 million at the end of the fourth quarter. On the second spot was Royce & Associates which amassed $28.7 million worth of shares. Verdad Advisers, Nishkama Capital, and Pura Vida Investments were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Rubric Capital Management allocated the biggest weight to Kraton Corporation (NYSE:KRA), around 3.21% of its 13F portfolio. Verdad Advisers is also relatively very bullish on the stock, setting aside 2.62 percent of its 13F equity portfolio to KRA.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, created the most outsized position in Kraton Corporation (NYSE:KRA). Balyasny Asset Management had $6.5 million invested in the company at the end of the quarter. Marc Majzner’s Clearline Capital also made a $4.8 million investment in the stock during the quarter. The following funds were also among the new KRA investors: John Bader’s Halcyon Asset Management, D. E. Shaw’s D E Shaw, and Sander Gerber’s Hudson Bay Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Kraton Corporation (NYSE:KRA) but similarly valued. We will take a look at Redwood Trust, Inc. (NYSE:RWT), OFG Bancorp (NYSE:OFG), Loral Space & Communications Inc (NASDAQ:LORL), RPC, Inc. (NYSE:RES), Denny’s Corporation (NASDAQ:DENN), Stock Yards Bancorp, Inc. (NASDAQ:SYBT), and Huron Consulting Group Inc.(NASDAQ:HURN). This group of stocks’ market caps are similar to KRA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RWT | 18 | 69547 | -4 |
| OFG | 10 | 60051 | 2 |
| LORL | 14 | 432461 | -3 |
| RES | 14 | 32492 | -3 |
| DENN | 20 | 118636 | 3 |
| SYBT | 5 | 6466 | -1 |
| HURN | 8 | 23348 | 2 |
| Average | 12.7 | 106143 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $106 million. That figure was $141 million in KRA’s case. Denny’s Corporation (NASDAQ:DENN) is the most popular stock in this table. On the other hand Stock Yards Bancorp, Inc. (NASDAQ:SYBT) is the least popular one with only 5 bullish hedge fund positions. Kraton Corporation (NYSE:KRA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KRA is 78.4. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately KRA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on KRA were disappointed as the stock returned 0.7% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Kraton Corp (NYSE:KRA)
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Disclosure: None. This article was originally published at Insider Monkey.
