Was The Smart Money Right About Kohl’s Corporation (KSS)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Kohl’s Corporation (NYSE:KSS) based on those filings.

Is Kohl’s Corporation (NYSE:KSS) a cheap investment today? The smart money was buying. The number of bullish hedge fund positions advanced by 2 recently. Kohl’s Corporation (NYSE:KSS) was in 40 hedge funds’ portfolios at the end of December. The all time high for this statistic is 42. Our calculations also showed that KSS isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Arnaud Ajdler of Engine Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. With all of this in mind let’s check out the latest hedge fund action encompassing Kohl’s Corporation (NYSE:KSS).

Do Hedge Funds Think KSS Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KSS over the last 22 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Kohl’s Corporation (NYSE:KSS) was held by Arrowstreet Capital, which reported holding $169.8 million worth of stock at the end of December. It was followed by Adage Capital Management with a $164 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Legion Partners Asset Management allocated the biggest weight to Kohl’s Corporation (NYSE:KSS), around 10.34% of its 13F portfolio. Engine Capital is also relatively very bullish on the stock, dishing out 5.99 percent of its 13F equity portfolio to KSS.

As one would reasonably expect, some big names have jumped into Kohl’s Corporation (NYSE:KSS) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, established the biggest position in Kohl’s Corporation (NYSE:KSS). Adage Capital Management had $164 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also made a $89.7 million investment in the stock during the quarter. The other funds with new positions in the stock are David Tepper’s Appaloosa Management LP, Anand Parekh’s Alyeska Investment Group, and Arnaud Ajdler’s Engine Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Kohl’s Corporation (NYSE:KSS) but similarly valued. We will take a look at Rexford Industrial Realty Inc (NYSE:REXR), Jabil Inc. (NYSE:JBL), OGE Energy Corp. (NYSE:OGE), Performance Food Group Company (NYSE:PFGC), Penumbra Inc (NYSE:PEN), Stericycle Inc (NASDAQ:SRCL), and Capri Holdings Limited (NYSE:CPRI). This group of stocks’ market caps match KSS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $415 million. That figure was $1150 million in KSS’s case. Capri Holdings Limited (NYSE:CPRI) is the most popular stock in this table. On the other hand Rexford Industrial Realty Inc (NYSE:REXR) is the least popular one with only 17 bullish hedge fund positions. Kohl’s Corporation (NYSE:KSS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KSS is 81.6. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on KSS as the stock returned 44.7% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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