In this article, we take a look at the top 10 stocks Kettle Hill Capital Management is buying. You can skip our comprehensive analysis of Andrew Kurita’s history, investment philosophy, and hedge fund performance, and go directly to Top 5 Stocks Kettle Hill Capital Management Is Buying.
Andrew Kurita’s Kettle Hill Capital Management is a New York-based long/short equity hedge fund that focuses its investment efforts on the small-cap space. The fund, which was founded in 2003 by Mr. Kurita, uses proprietary fundamental research and takes a disciplined approach to its investment and risk management decisions as part of its investment philosophy.
The Kettle Hill Partners, LP fund had a string of underperformance heading into the 2020’s, as it posted marginal losses in both 2018 and 2019 after a similar marginal gain in 2017. From its inception in June 2003 through March 2020, the fund has managed compound annual returns of 7.53%. As of July 2021, Kettle Hill had nearly $800 million in assets under management, while its well-diversified 13F portfolio was valued at $535 million at the end of September 2020.
During the third quarter, Kettle Hill Capital Management added 18 new positions to its 13F portfolio in anticipation of big things to come for those stocks. We’ll take a look at the fund’s 10 biggest new purchases of the quarter in this article.
Photo by Joshua Mayo on Unsplash
Our Methodology
These are the top stock picks of Kettle Hill Capital Management. We used the hedge fund’s Q3 portfolio for this analysis.
Top 10 Stocks Kettle Hill Capital Management Is Buying
10. Alphabet Inc. (NASDAQ:GOOGL)
Our list of the top stocks that Kettle Hill Capital Management is buying now starts with Alphabet Inc. (NASDAQ:GOOGL). Kettle Hill took the plunge into one of the most popular hedge fund stocks during Q3, opening a new position of 2,740 of the tech giant’s class A shares worth $7.33 million on September 30. There are more than 350 hedge fund positions in Google’s two classes of shares.
One of the Top 5 Stock Picks of George Soros, Alphabet Inc. (NASDAQ:GOOGL) has shrugged off declining search revenue by greatly increasing revenue and margins on its wildly popular Play Store and through video giant YouTube. Google’s cloud services have also been a huge bright spot for Alphabet Inc. (NASDAQ:GOOGL)’s bottom line. Future growth also seems assured thanks to Google’s huge investments in AI, which should pay dividends across the breadth of its virtual and physical offerings alike.
Saturna Capital, an investment management firm, published its “Amana Funds” third-quarter 2021 investor letter, and mentioned Alphabet Inc. (NASDAQ:GOOGL). Here‘s what the fund said:
“Alphabet was a new addition to the Fund this year, as we believed it important to have exposure to the top online media and advertising company in the world. Some have raised concerns surrounding Alphabet’s exposure to political interference, but we take comfort from the belief that were the company to be broken up, it would quite likely be worth even more than as a single entity.”
9. Meta Platforms, Inc. (NASDAQ:FB)
Kettle Hill also opened a new stake in Meta Platforms, Inc. (NASDAQ:FB), the bizarre and memetastic new name for the parent company of Facebook and Instagram. The fund bought 21,680 shares of Meta Platforms, Inc. (NASDAQ:FB) during Q3, building a position worth $7.36 million on September 30. Meta Platforms is another of the most popular stocks among hedge funds, being owned by 251 of them at the end of Q3.
While Meta Platforms, Inc. (NASDAQ:FB) CEO Mark Zuckerberg’s declaration that he wants to take over the metaverse was just a tad creepy, there’s no denying the Facebook’s continuous integration of new technologies into its platform, including cryptocurrencies and blockchain, could help pave the way for the future online metaverse he envisions, where people live, work, play, and pay in Meta Platforms’ digital worlds. Meta Platforms pulled in $3.22 in EPS during Q3, narrowly beating estimates.
Canterbury Tollgate, an investment management firm, published its third-quarter 2021 investor letter, and mentioned Meta Platforms, Inc. (NASDAQ:FB). Here‘s what the fund said:
“To say traditional media is anti-Facebook would not be an overstatement. An already intense and multi-year critique of (or attack on) Facebook has ratcheted up in recent weeks. Facebook’s research efforts have been reported on, if often derided, for nearly a decade. Going back to 2014, Slate.com called their research practices “unethical” when FB tried to study the impact social posts had on users. Now those efforts have been turned against them for the kill shot.
My job is to observe, assess, and allocate. Not to commentate on all the whims and wishes of media narrative. However, in the case of Facebook I cannot avoid going into some detail re: the onslaught against them, which I find to be most unwarranted and insincere.
Last month the Wall Street Journal ran a five-piece series titled “The Facebook Files” which allegedly shows how toxic Instagram is for teens. The foundation of their argument was a single slide from an internal presentation claiming, based on FB’s own research, that of teens who had a negative self-image, one-third said Instagram “made them feel worse.”iii Somehow the implication here is that this is not an inescapable aspect of either the human psyche and/or society-atlarge, but that it is of Facebook’s doing…” (Click here to see the full text)
8. Dycom Industries, Inc. (NYSE:DY)
Dycom Industries, Inc. (NYSE:DY) was another new addition to the 13F portfolio of Kettle Hill during Q3, as the fund bought 103,379 shares valued at $7.37 million at the end of the quarter. Kettle Hill was one of just 18 hedge funds tracked by Insider Monkey’s database that were long DY at that time.
Hedge fund ownership of Dycom Industries, Inc. (NYSE:DY) fell in lockstep with the stock’s decline throughout 2018 and 2019 but has yet to rebound much even as Dycom shares have more than doubled in value since the middle of 2020.
That’s somewhat surprising given that infrastructure companies like Dycom Industries, Inc. (NYSE:DY) appear poised to benefit greatly from President Biden’s $2 trillion plan to upgrade America’s roads, bridges, and other important infrastructure.
7. Comerica Incorporated (NYSE:CMA)
Kettle Hill opened a new position in financial services company Comerica Incorporated (NYSE:CMA) during Q3, buying 91,892 shares worth $7.4 million on September 30. Hedge fund ownership of Comerica has tumbled by nearly 50% since the beginning of 2018.
Comerica Incorporated (NYSE:CMA) pulled in $1.90 in EPS during the third quarter, greatly outpacing estimates of $1.64. Comerica Incorporated (NYSE:CMA)’s revenue also rose by 6.34% year-over-year to $755 million thanks to growth in the commercial loan segment.
6. Zions Bancorporation, National Association (NASDAQ:ZION)
Zions Bancorporation, National Association (NASDAQ:ZION) is another financial services company that Kettle Hill took a new stake in during Q3, buying 120,609 ZION shares worth $7.46 million at the end of Q3. As with Comerica, hedge funds have soured on ZION over the years, with less than half the hedge fund shareholders of the stock as of Q3 than there were at the beginning of 2017.
It’s possible that Kettle Hill’s bets on Zions Bancorporation, National Association (NASDAQ:ZION) and Comerica are a bet on interest rates being pushed higher in 2022, which seemed a distinct possibility in late September after the Fed’s meeting revealed that half of the 18 officials would be ready to do so next year. National Association (NASDAQ:ZION) shares have more than doubled in value since November 2020.
Click to continue reading and see the Top 5 Stocks Kettle Hill Capital Management Is Buying.
Suggested articles:
- 10 Stocks that Pay Dividends Monthly
- 12 Best Vacation Stocks to Buy Now
- 15 Best News and Reading Apps
Disclosure: None. Top 10 Stocks Kettle Hill Capital Management Is Buying is originally published at Insider Monkey.
