Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Kirby Corporation (NYSE:KEX)? The smart money sentiment can provide an answer to this question.
Kirby Corporation (NYSE:KEX) was in 23 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 34. KEX has experienced an increase in support from the world’s most elite money managers of late. There were 22 hedge funds in our database with KEX holdings at the end of December. Our calculations also showed that KEX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Lee Ainslie of Maverick Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. Now we’re going to check out the recent hedge fund action encompassing Kirby Corporation (NYSE:KEX).
Do Hedge Funds Think KEX Is A Good Stock To Buy Now?
At the end of March, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in KEX a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Diamond Hill Capital held the most valuable stake in Kirby Corporation (NYSE:KEX), which was worth $169.2 million at the end of the fourth quarter. On the second spot was Thunderbird Partners which amassed $130.3 million worth of shares. Hound Partners, Select Equity Group, and D E Shaw 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 Thunderbird Partners allocated the biggest weight to Kirby Corporation (NYSE:KEX), around 10.98% of its 13F portfolio. StackLine Partners is also relatively very bullish on the stock, dishing out 5.45 percent of its 13F equity portfolio to KEX.
As one would reasonably expect, some big names have jumped into Kirby Corporation (NYSE:KEX) headfirst. Select Equity Group, managed by Robert Joseph Caruso, assembled the most outsized call position in Kirby Corporation (NYSE:KEX). Select Equity Group had $75.4 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also made a $3.8 million investment in the stock during the quarter. The following funds were also among the new KEX investors: Frank Fu’s CaaS Capital, Lee Ainslie’s Maverick Capital, and Greg Eisner’s Engineers Gate Manager.
Let’s check out hedge fund activity in other stocks similar to Kirby Corporation (NYSE:KEX). We will take a look at BanColombia S.A. (NYSE:CIB), Bank of Hawaii Corporation (NYSE:BOH), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), Spirit Airlines Incorporated (NYSE:SAVE), Eastern Bankshares, Inc. (NASDAQ:EBC), SpringWorks Therapeutics, Inc. (NASDAQ:SWTX), and WNS (Holdings) Limited (NYSE:WNS). This group of stocks’ market valuations resemble KEX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CIB | 3 | 68988 | -1 |
| BOH | 15 | 45660 | -2 |
| RETA | 24 | 266316 | 0 |
| SAVE | 24 | 250551 | 1 |
| EBC | 14 | 105049 | -2 |
| SWTX | 22 | 1238860 | 0 |
| WNS | 21 | 261004 | -2 |
| Average | 17.6 | 319490 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $319 million. That figure was $632 million in KEX’s case. Reata Pharmaceuticals, Inc. (NASDAQ:RETA) is the most popular stock in this table. On the other hand BanColombia S.A. (NYSE:CIB) is the least popular one with only 3 bullish hedge fund positions. Kirby Corporation (NYSE:KEX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KEX is 73.9. 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 KEX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on KEX were disappointed as the stock returned -5% 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.
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Disclosure: None. This article was originally published at Insider Monkey.
