Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Hedge fund interest in KT Corporation (NYSE:KT) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Adaptive Biotechnologies Corporation (NASDAQ:ADPT), Algonquin Power & Utilities Corp. (NYSE:AQN), and Tallgrass Energy, LP (NYSE:TGE) to gather more data points. Our calculations also showed that KT isn't among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
KT_oct2019
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to view the latest hedge fund action encompassing KT Corporation (NYSE:KT).
Hedge fund activity in KT Corporation (NYSE:KT)
At Q2's end, a total of 19 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 9 hedge funds with a bullish position in KT a year ago. With hedgies' capital changing hands, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Bruce Kovner, Caxton Associates LP
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Iben's Kopernik Global Investors has the biggest position in KT Corporation (NYSE:KT), worth close to $87.8 million, corresponding to 15% of its total 13F portfolio. The second largest stake is held by Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $56.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish encompass Simon Sadler's Segantii Capital, Noam Gottesman's GLG Partners and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.
Judging by the fact that KT Corporation (NYSE:KT) has witnessed a decline in interest from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of hedge funds that slashed their entire stakes in the second quarter. It's worth mentioning that Matthew Tewksbury's Stevens Capital Management cut the largest investment of all the hedgies followed by Insider Monkey, comprising about $1.6 million in stock. Ronald Hua's fund, Qtron Investments, also said goodbye to its stock, about $0.9 million worth. These moves 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 - not necessarily in the same industry as KT Corporation (NYSE:KT) but similarly valued. We will take a look at Adaptive Biotechnologies Corporation (NASDAQ:ADPT), Algonquin Power & Utilities Corp. (NYSE:AQN), Tallgrass Energy, LP (NYSE:TGE), and AGCO Corporation (NYSE:AGCO). This group of stocks' market valuations are closest to KT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ADPT,38,3181443,38 AQN,9,63964,-3 TGE,13,47232,2 AGCO,25,227411,-1 Average,21.25,880013,9 [/table]
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $880 million. That figure was $321 million in KT's case. Adaptive Biotechnologies Corporation (NASDAQ:ADPT) is the most popular stock in this table. On the other hand Algonquin Power & Utilities Corp. (NYSE:AQN) is the least popular one with only 9 bullish hedge fund positions. KT Corporation (NYSE:KT) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately KT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KT investors were disappointed as the stock returned -8.6% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
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