It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Kilroy Realty Corp (NYSE:KRC) during the quarter below.
Kilroy Realty Corp (NYSE:KRC) has seen an increase in enthusiasm from smart money of late. KRC was in 13 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 12 hedge funds in our database with KRC positions at the end of the previous quarter. Our calculations also showed that KRC isn’t among the 30 most popular stocks among hedge funds.
In the eyes of most stock holders, hedge funds are viewed as worthless, old financial tools of the past. While there are over 8000 funds with their doors open at present, Our experts choose to focus on the elite of this group, about 750 funds. These money managers manage bulk of all hedge funds’ total asset base, and by observing their matchless picks, Insider Monkey has brought to light many investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
We’re going to go over the recent hedge fund action encompassing Kilroy Realty Corp (NYSE:KRC).
What does the smart money think about Kilroy Realty Corp (NYSE:KRC)?
Heading into the first quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in KRC over the last 14 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Zimmer Partners was the largest shareholder of Kilroy Realty Corp (NYSE:KRC), with a stake worth $78.3 million reported as of the end of September. Trailing Zimmer Partners was Renaissance Technologies, which amassed a stake valued at $47 million. D E Shaw, Long Pond Capital, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers have been driving this bullishness. Long Pond Capital, managed by John Khoury, assembled the biggest position in Kilroy Realty Corp (NYSE:KRC). Long Pond Capital had $11.3 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $9.1 million position during the quarter. The following funds were also among the new KRC investors: Matthew Tewksbury’s Stevens Capital Management and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s check out hedge fund activity in other stocks similar to Kilroy Realty Corp (NYSE:KRC). These stocks are Santander Consumer USA Holdings Inc (NYSE:SC), East West Bancorp, Inc. (NASDAQ:EWBC), Dolby Laboratories, Inc. (NYSE:DLB), and Commerce Bancshares, Inc. (NASDAQ:CBSH). This group of stocks’ market valuations are similar to KRC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SC | 21 | 565375 | -5 |
| EWBC | 27 | 461953 | -2 |
| DLB | 23 | 493936 | -6 |
| CBSH | 11 | 82148 | -1 |
| Average | 20.5 | 400853 | -3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $401 million. That figure was $178 million in KRC’s case. East West Bancorp, Inc. (NASDAQ:EWBC) is the most popular stock in this table. On the other hand Commerce Bancshares, Inc. (NASDAQ:CBSH) is the least popular one with only 11 bullish hedge fund positions. Kilroy Realty Corp (NYSE:KRC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on KRC as the stock returned 22.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
