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 this article we are going to look into hedge fund sentiment on Kornit Digital Ltd. (NASDAQ:KRNT).
Kornit Digital Ltd. (NASDAQ:KRNT) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of the fourth quarter of 2019. At the end of this article we will also compare KRNT to other stocks including Viela Bio, Inc. (NASDAQ:VIE), Vir Biotechnology, Inc. (NASDAQ:VIR), and Viad Corp (NYSE:VVI) to get a better sense of its popularity.
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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Dmitry Balyasny of Balyasny Asset Management
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. With all of this in mind we’re going to take a peek at the fresh hedge fund action regarding Kornit Digital Ltd. (NASDAQ:KRNT).
What does smart money think about Kornit Digital Ltd. (NASDAQ:KRNT)?
At the end of the fourth quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KRNT 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.
Among these funds, D E Shaw held the most valuable stake in Kornit Digital Ltd. (NASDAQ:KRNT), which was worth $9.4 million at the end of the third quarter. On the second spot was Intrinsic Edge Capital which amassed $9.2 million worth of shares. Citadel Investment Group, G2 Investment Partners Management, and Rima Senvest Management 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 G2 Investment Partners Management allocated the biggest weight to Kornit Digital Ltd. (NASDAQ:KRNT), around 2.25% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, earmarking 1.15 percent of its 13F equity portfolio to KRNT.
Since Kornit Digital Ltd. (NASDAQ:KRNT) has faced bearish sentiment from hedge fund managers, logic holds that there exists a select few funds that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Jordan Moelis and Jeff Farroni’s Deep Field Asset Management sold off the biggest stake of the “upper crust” of funds watched by Insider Monkey, totaling close to $0.3 million in stock. Renaissance Technologies, also dumped its stock, about $0.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Kornit Digital Ltd. (NASDAQ:KRNT) but similarly valued. We will take a look at Viela Bio, Inc. (NASDAQ:VIE), Vir Biotechnology, Inc. (NASDAQ:VIR), Viad Corp (NYSE:VVI), and Meta Financial Group Inc. (NASDAQ:CASH). This group of stocks’ market valuations match KRNT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VIE | 6 | 207492 | 6 |
| VIR | 2 | 8818 | 2 |
| VVI | 14 | 99770 | -1 |
| CASH | 12 | 152401 | -3 |
| Average | 8.5 | 117120 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $45 million in KRNT’s case. Viad Corp (NYSE:VVI) is the most popular stock in this table. On the other hand Vir Biotechnology, Inc. (NASDAQ:VIR) is the least popular one with only 2 bullish hedge fund positions. Kornit Digital Ltd. (NASDAQ:KRNT) is not the most popular stock in this group but hedge fund interest is still above average. 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 still beat the market by 12.9 percentage points. Hedge funds were also right about betting on KRNT, though not to the same extent, as the stock returned -10.9% during the first four months of 2020 (through May 1st) and outperformed the market as well.
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.
