How do we determine whether Kforce Inc. (NASDAQ:KFRC) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Kforce Inc. (NASDAQ:KFRC) was in 19 hedge funds' portfolios at the end of September. KFRC investors should be aware of an increase in hedge fund interest of late. There were 18 hedge funds in our database with KFRC holdings at the end of the previous quarter. Our calculations also showed that KFRC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's review the key hedge fund action encompassing Kforce Inc. (NASDAQ:KFRC).
What does smart money think about Kforce Inc. (NASDAQ:KFRC)?
At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in KFRC a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Kforce Inc. (NASDAQ:KFRC) was held by AQR Capital Management, which reported holding $25.3 million worth of stock at the end of September. It was followed by Royce & Associates with a $15.9 million position. Other investors bullish on the company included Arrowstreet Capital, GLG Partners, and SG Capital Management. In terms of the portfolio weights assigned to each position SG Capital Management allocated the biggest weight to Kforce Inc. (NASDAQ:KFRC), around 1.07% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, setting aside 0.41 percent of its 13F equity portfolio to KFRC.
Now, key money managers have jumped into Kforce Inc. (NASDAQ:KFRC) headfirst. SG Capital Management, managed by Ken Grossman and Glen Schneider, established the largest call position in Kforce Inc. (NASDAQ:KFRC). SG Capital Management had $5.7 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also made a $1.1 million investment in the stock during the quarter. The other funds with brand new KFRC positions are Donald Sussman's Paloma Partners and Hoon Kim's Quantinno Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Kforce Inc. (NASDAQ:KFRC) but similarly valued. We will take a look at HarborOne Bancorp, Inc. (NASDAQ:HONE), MAG Silver Corp. (NYSE:MAG), Hollysys Automation Technologies Ltd (NASDAQ:HOLI), and NGM Biopharmaceuticals, Inc. (NASDAQ:NGM). This group of stocks' market valuations are closest to KFRC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HONE,11,24308,7 MAG,12,26911,3 HOLI,13,61301,0 NGM,9,18872,-1 Average,11.25,32848,2.25 [/table]
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $79 million in KFRC's case. Hollysys Automation Technologies Ltd (NASDAQ:HOLI) is the most popular stock in this table. On the other hand NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Kforce Inc. (NASDAQ:KFRC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately KFRC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on KFRC were disappointed as the stock returned 4.4% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
