Should You Buy Kimball International Inc (KBAL)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtKimball International Inc (NASDAQ:KBAL) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Hedge fund interest in Kimball International Inc (NASDAQ:KBAL) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Merchants Bancorp (NASDAQ:MBIN), Ichor Holdings Ltd. (NASDAQ:ICHR), and American Vanguard Corp. (NYSE:AVD) to gather more data points. Our calculations also showed that KBAL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are several indicators stock market investors can use to value publicly traded companies. A duo of the most innovative indicators are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the best fund managers can outclass the S&P 500 by a superb amount (see the details here).

Cliff Asness of AQR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the latest hedge fund action surrounding Kimball International Inc (NASDAQ:KBAL).

Hedge fund activity in Kimball International Inc (NASDAQ:KBAL)

Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in KBAL a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Kimball International Inc (NASDAQ:KBAL), which was worth $31.3 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $23.9 million worth of shares. AQR Capital Management, Arrowstreet Capital, 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 Cloverdale Capital Management allocated the biggest weight to Kimball International Inc (NASDAQ:KBAL), around 2.1% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.33 percent of its 13F equity portfolio to KBAL.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Cloverdale Capital Management).

Let’s also examine hedge fund activity in other stocks similar to Kimball International Inc (NASDAQ:KBAL). These stocks are Merchants Bancorp (NASDAQ:MBIN), Ichor Holdings Ltd. (NASDAQ:ICHR), American Vanguard Corp. (NYSE:AVD), and MYR Group Inc (NASDAQ:MYRG). This group of stocks’ market valuations are similar to KBAL’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $79 million in KBAL’s case. Ichor Holdings Ltd. (NASDAQ:ICHR) is the most popular stock in this table. On the other hand Merchants Bancorp (NASDAQ:MBIN) is the least popular one with only 8 bullish hedge fund positions. Kimball International Inc (NASDAQ:KBAL) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately KBAL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on KBAL were disappointed as the stock returned -2.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Disclosure: None. This article was originally published at Insider Monkey.