Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Knoll Inc (NYSE:KNL).
Knoll Inc (NYSE:KNL) was in 19 hedge funds’ portfolios at the end of the fourth quarter of 2019. KNL has seen an increase in support from the world’s most elite money managers lately. There were 15 hedge funds in our database with KNL positions at the end of the previous quarter. Our calculations also showed that KNL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard Driehaus of Driehaus Capital
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the “next Amazon” in this video; again we are listening. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a glance at the key hedge fund action regarding Knoll Inc (NYSE:KNL).
How are hedge funds trading Knoll Inc (NYSE:KNL)?
At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in KNL over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, founded by Jim Simons, holds the number one position in Knoll Inc (NYSE:KNL). Renaissance Technologies has a $9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Driehaus Capital, led by Richard Driehaus, holding a $8.5 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions encompass D. E. Shaw’s D E Shaw, Ken Griffin’s Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Venator Capital Management allocated the biggest weight to Knoll Inc (NYSE:KNL), around 1.84% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.47 percent of its 13F equity portfolio to KNL.
Consequently, key hedge funds have been driving this bullishness. Brant Point Investment Management, managed by Ira Unschuld, assembled the most outsized position in Knoll Inc (NYSE:KNL). Brant Point Investment Management had $4.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $3.4 million investment in the stock during the quarter. The other funds with brand new KNL positions are Brandon Osten’s Venator Capital Management, David Harding’s Winton Capital Management, and Qing Li’s Sciencast Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Knoll Inc (NYSE:KNL) but similarly valued. These stocks are Raven Industries, Inc. (NASDAQ:RAVN), Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY), NGM Biopharmaceuticals, Inc. (NASDAQ:NGM), and Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT). All of these stocks’ market caps are closest to KNL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RAVN | 13 | 103902 | 1 |
| PLAY | 19 | 237066 | 0 |
| NGM | 7 | 48026 | -2 |
| RCKT | 21 | 303923 | 7 |
| Average | 15 | 173229 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $173 million. That figure was $63 million in KNL’s case. Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) is the most popular stock in this table. On the other hand NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) is the least popular one with only 7 bullish hedge fund positions. Knoll Inc (NYSE:KNL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately KNL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on KNL were disappointed as the stock returned -55.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
