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How Did Kimberly Clark Corporation (KMB) Compare Against Top Hedge Fund Stocks in 2019?

Reymerlyn Martin

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Kimberly Clark Corporation (NYSE:KMB).

Hedge fund interest in Kimberly Clark Corporation (NYSE:KMB) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare KMB to other stocks including Waste Management, Inc. (NYSE:WM), American International Group Inc (NYSE:AIG), and TC Energy Corporation (NYSE:TRP) to get a better sense of its popularity.

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

[caption id="attachment_30621" align="aligncenter" width="600"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now let's view the latest hedge fund action encompassing Kimberly Clark Corporation (NYSE:KMB).

How are hedge funds trading Kimberly Clark Corporation (NYSE:KMB)?

At Q3's end, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards KMB over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, AQR Capital Management was the largest shareholder of Kimberly Clark Corporation (NYSE:KMB), with a stake worth $331.9 million reported as of the end of September. Trailing AQR Capital Management was Diamond Hill Capital, which amassed a stake valued at $231.9 million. Citadel Investment Group, Holocene Advisors, and Suvretta Capital 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 Suvretta Capital Management allocated the biggest weight to Kimberly Clark Corporation (NYSE:KMB), around 4% of its 13F portfolio. Holocene Advisors is also relatively very bullish on the stock, designating 1.61 percent of its 13F equity portfolio to KMB.

Since Kimberly Clark Corporation (NYSE:KMB) has faced bearish sentiment from the smart money, we can see that there is a sect of hedge funds who sold off their positions entirely last quarter. At the top of the heap, Javier Velazquez's Albar Capital dropped the biggest position of the 750 funds monitored by Insider Monkey, comprising close to $35.1 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace, also sold off its stock, about $8.3 million worth. These bearish behaviors are important to note, as aggregate 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 Kimberly Clark Corporation (NYSE:KMB) but similarly valued. We will take a look at Waste Management, Inc. (NYSE:WM), American International Group Inc (NYSE:AIG), TC Energy Corporation (NYSE:TRP), and Infosys Limited (NYSE:INFY). All of these stocks' market caps match KMB's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WM,46,3533060,11 AIG,49,2451222,8 TRP,18,272298,6 INFY,24,1437631,-1 Average,34.25,1923553,6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $1924 million. That figure was $1622 million in KMB's case. American International Group Inc (NYSE:AIG) is the most popular stock in this table. On the other hand TC Energy Corporation (NYSE:TRP) is the least popular one with only 18 bullish hedge fund positions. Kimberly Clark Corporation (NYSE:KMB) 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 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately KMB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on KMB were disappointed as the stock returned 24% in 2019 (through December 23rd) 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 this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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