Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards The Kroger Co. (NYSE:KR) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Hedge fund interest in The Kroger Co. (NYSE:KR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that KR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare KR to other stocks including Ameriprise Financial, Inc. (NYSE:AMP), Willis Towers Watson Public Limited Company (NASDAQ:WLTW), and Garmin Ltd. (NYSE:GRMN) to get a better sense of its popularity.
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 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. Now we’re going to review the latest hedge fund action encompassing The Kroger Co. (NYSE:KR).
Ian Wace of Marshall Wace
Do Hedge Funds Think KR Is A Good Stock To Buy Now?
At third quarter’s end, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 35 hedge funds with a bullish position in KR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in The Kroger Co. (NYSE:KR) was held by Berkshire Hathaway, which reported holding $2498.1 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $750.9 million position. Other investors bullish on the company included Citadel Investment Group, AQR Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position L2 Asset Management allocated the biggest weight to The Kroger Co. (NYSE:KR), around 2.63% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, earmarking 2.22 percent of its 13F equity portfolio to KR.
Judging by the fact that The Kroger Co. (NYSE:KR) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds who sold off their full holdings last quarter. Intriguingly, Donald Sussman’s Paloma Partners said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, totaling about $1.9 million in stock, and Andrew Weiss’s Weiss Asset Management was right behind this move, as the fund cut about $1.8 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to The Kroger Co. (NYSE:KR). These stocks are Ameriprise Financial, Inc. (NYSE:AMP), Willis Towers Watson Public Limited Company (NASDAQ:WLTW), Garmin Ltd. (NYSE:GRMN), TELUS Corporation (NYSE:TU), Paycom Software Inc (NYSE:PAYC), ANSYS, Inc. (NASDAQ:ANSS), and Fastenal Company (NASDAQ:FAST). This group of stocks’ market caps are similar to KR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMP | 40 | 1309163 | 3 |
| WLTW | 75 | 5055019 | 5 |
| GRMN | 30 | 465208 | 5 |
| TU | 12 | 141291 | -1 |
| PAYC | 40 | 1424558 | 1 |
| ANSS | 38 | 1493156 | -8 |
| FAST | 30 | 609114 | 5 |
| Average | 37.9 | 1499644 | 1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.9 hedge funds with bullish positions and the average amount invested in these stocks was $1500 million. That figure was $3920 million in KR’s case. Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is the most popular stock in this table. On the other hand TELUS Corporation (NYSE:TU) is the least popular one with only 12 bullish hedge fund positions. The Kroger Co. (NYSE:KR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KR is 51.9. 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 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on KR as the stock returned 8.4% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Kroger Co (NYSE:KR)
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Disclosure: None. This article was originally published at Insider Monkey.
