Were Hedge Funds Right About Piling Into KKR & Co Inc. (KKR)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 887 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2020. In this article we are going to take a look at smart money sentiment towards KKR & Co Inc. (NYSE:KKR).

Is KKR & Co Inc. (NYSE:KKR) a healthy stock for your portfolio? Investors who are in the know were turning bullish. The number of bullish hedge fund bets improved by 4 recently. KKR & Co Inc. (NYSE:KKR) was in 54 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 56. Our calculations also showed that KKR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 124 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Jeffrey Ubben of ValueAct 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. Keeping this in mind let’s take a look at the latest hedge fund action regarding KKR & Co Inc. (NYSE:KKR).

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

At fourth quarter’s end, a total of 54 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the third quarter of 2020. On the other hand, there were a total of 56 hedge funds with a bullish position in KKR a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Jeffrey Ubben’s ValueAct Capital has the biggest position in KKR & Co Inc. (NYSE:KKR), worth close to $1.5406 billion, amounting to 17.9% of its total 13F portfolio. Coming in second is Akre Capital Management, led by Charles Akre, holding a $596.3 million position; 4% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism consist of Ric Dillon’s Diamond Hill Capital, John Armitage’s Egerton Capital Limited and Panayotis Takis Sparaggis’s Alkeon Capital Management. In terms of the portfolio weights assigned to each position Blacksheep Fund Management allocated the biggest weight to KKR & Co Inc. (NYSE:KKR), around 20.21% of its 13F portfolio. ValueAct Capital is also relatively very bullish on the stock, setting aside 17.87 percent of its 13F equity portfolio to KKR.

As aggregate interest increased, some big names have jumped into KKR & Co Inc. (NYSE:KKR) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the most outsized position in KKR & Co Inc. (NYSE:KKR). Two Sigma Advisors had $18.4 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $15.4 million position during the quarter. The other funds with new positions in the stock are Frank Fu’s CaaS Capital, Allon Hellmann’s Full18 Capital, and Donald Sussman’s Paloma Partners.

Let’s also examine hedge fund activity in other stocks similar to KKR & Co Inc. (NYSE:KKR). These stocks are ViacomCBS Inc. (NASDAQ:VIAC), Ameriprise Financial, Inc. (NYSE:AMP), Old Dominion Freight Line, Inc. (NASDAQ:ODFL), Garmin Ltd. (NASDAQ:GRMN), Ryanair Holdings plc (NASDAQ:RYAAY), FleetCor Technologies, Inc. (NYSE:FLT), and Coca-Cola European Partners plc (NYSE:CCEP). This group of stocks’ market caps resemble KKR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.7 hedge funds with bullish positions and the average amount invested in these stocks was $969 million. That figure was $4137 million in KKR’s case. Old Dominion Freight Line, Inc. (NASDAQ:ODFL) is the most popular stock in this table. On the other hand Ryanair Holdings plc (NASDAQ:RYAAY) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks KKR & Co Inc. (NYSE:KKR) is more popular among hedge funds. Our overall hedge fund sentiment score for KKR is 87.9. 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 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 returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on KKR as the stock returned 40.1% since the end of December (through 4/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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