Should You Add Kimco Realty Corp (KIM) to Your Portfolio?

The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Kimco Realty Corp (NYSE:KIM) from the perspective of those successful funds.

Kimco Realty Corp (NYSE:KIM) has seen an increase in enthusiasm from smart money lately. There were 7 hedge funds in our database with KIM positions at the end of the previous quarter. At the end of this article we will also compare KIM to other stocks including Best Buy Co., Inc. (NYSE:BBY), Fastenal Company (NASDAQ:FAST), and Cabot Oil & Gas Corporation (NYSE:COG) to get a better sense of its popularity.

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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Now, let’s go over the new action surrounding Kimco Realty Corp (NYSE:KIM).

What have hedge funds been doing with Kimco Realty Corp (NYSE:KIM)?

Heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a growth of 57% from the second quarter of 2016. By comparison, 14 hedge funds held shares or bullish call options in KIM heading into this year. So, let’s review 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, David Harding’s Winton Capital Management has the number one position in Kimco Realty Corp (NYSE:KIM), worth close to $18.7 million, amounting to 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Adage Capital Management, led by Phill Gross and Robert Atchinson, which holds a $17.6 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other peers that hold long positions include Cliff Asness’ AQR Capital Management, Greg Poole’s Echo Street Capital Management and J. Alan Reid, Jr.’s Forward Management. We should note that Forward Management is 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.

As aggregate interest increased, key money managers were breaking ground themselves. Echo Street Capital Management initiated the most valuable position in Kimco Realty Corp (NYSE:KIM). Echo Street Capital Management had $1.8 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated a $1.3 million position during the quarter. The other funds with new positions in the stock are Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Michael Platt and William Reeves’ BlueCrest Capital Mgmt., and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Kimco Realty Corp (NYSE:KIM) but similarly valued. These stocks are Best Buy Co., Inc. (NYSE:BBY), Fastenal Company (NASDAQ:FAST), Cabot Oil & Gas Corporation (NYSE:COG), and Universal Health Services, Inc. (NYSE:UHS). This group of stocks’ market valuations are closest to KIM’s market valuation.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1.21 billion. That figure was $58 million in KIM’s case. Best Buy Co., Inc. (NYSE:BBY) is the most popular stock in this table. On the other hand Fastenal Company (NASDAQ:FAST) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Kimco Realty Corp (NYSE:KIM) is even less popular than FAST. 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. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None