The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 873 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 June 30th. In this article we look at what those investors think of KAR Auction Services Inc (NYSE:KAR).
KAR Auction Services Inc (NYSE:KAR) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. KAR Auction Services Inc (NYSE:KAR) was in 23 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 44. There were 22 hedge funds in our database with KAR positions at the end of the first quarter. Our calculations also showed that KAR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Jeffrey Bronchick of Cove Street Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 let’s review the fresh hedge fund action regarding KAR Auction Services Inc (NYSE:KAR).
Do Hedge Funds Think KAR Is A Good Stock To Buy Now?
At the end of June, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in KAR over the last 24 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Among these funds, Cardinal Capital held the most valuable stake in KAR Auction Services Inc (NYSE:KAR), which was worth $109.4 million at the end of the second quarter. On the second spot was Paradice Investment Management which amassed $71 million worth of shares. Two Sigma Advisors, Royce & Associates, and Cove Street Capital 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 Cumberland Associates / Springowl Associates allocated the biggest weight to KAR Auction Services Inc (NYSE:KAR), around 3.71% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, designating 3.3 percent of its 13F equity portfolio to KAR.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Holocene Advisors, managed by Brandon Haley, created the largest position in KAR Auction Services Inc (NYSE:KAR). Holocene Advisors had $1.5 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $1.3 million position during the quarter. The other funds with brand new KAR positions are Matthew Hulsizer’s PEAK6 Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Ran Pang’s Quantamental Technologies.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as KAR Auction Services Inc (NYSE:KAR) but similarly valued. We will take a look at Victory Capital Holdings, Inc. (NASDAQ:VCTR), Seres Therapeutics Inc (NASDAQ:MCRB), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), Kymera Therapeutics, Inc. (NASDAQ:KYMR), TechTarget Inc (NASDAQ:TTGT), Global Blood Therapeutics Inc (NASDAQ:GBT), and Vector Group Ltd (NYSE:VGR). All of these stocks’ market caps resemble KAR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VCTR | 14 | 83647 | 0 |
| MCRB | 16 | 271391 | -3 |
| LGND | 7 | 55674 | -6 |
| KYMR | 21 | 448831 | 5 |
| TTGT | 14 | 118269 | -3 |
| GBT | 16 | 456028 | -3 |
| VGR | 14 | 163192 | 0 |
| Average | 14.6 | 228147 | -1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $285 million in KAR’s case. Kymera Therapeutics, Inc. (NASDAQ:KYMR) is the most popular stock in this table. On the other hand Ligand Pharmaceuticals Inc. (NASDAQ:LGND) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks KAR Auction Services Inc (NYSE:KAR) is more popular among hedge funds. Our overall hedge fund sentiment score for KAR is 71.7. 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. 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 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Unfortunately KAR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on KAR were disappointed as the stock returned -16.5% since the end of the second quarter (through 11/5) 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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
