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Hedge Fund Sentiment Is Stagnant On Eastman Kodak Company (KODK)

Nina Todic

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 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 Eastman Kodak Company (NYSE:KODK).

Hedge fund interest in Eastman Kodak Company (NYSE:KODK) 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 SilverBow Resources, Inc. (NYSE:SBOW), Hovnanian Enterprises, Inc. (NYSE:HOV), and VOXX International Corporation (NASDAQ:VOXX) to gather more data points. Our calculations also showed that KODK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

To the average investor there are a large number of metrics investors employ to size up publicly traded companies. A couple of the most underrated metrics are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass the market by a very impressive margin (see the details here).

[caption id="attachment_340075" align="aligncenter" width="450"] Mason Hawkins of Southeastern Asset Management[/caption]

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. Keeping this in mind let's take a peek at the recent hedge fund action regarding Eastman Kodak Company (NYSE:KODK).

How are hedge funds trading Eastman Kodak Company (NYSE:KODK)?

At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in KODK a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

More specifically, Southeastern Asset Management was the largest shareholder of Eastman Kodak Company (NYSE:KODK), with a stake worth $13.1 million reported as of the end of September. Trailing Southeastern Asset Management was Millennium Management, which amassed a stake valued at $0.3 million. Citadel Investment Group, D E Shaw, and LMR Partners 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 Southeastern Asset Management allocated the biggest weight to Eastman Kodak Company (NYSE:KODK), around 0.23% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, designating 0.0024 percent of its 13F equity portfolio to KODK.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.

Let's also examine hedge fund activity in other stocks similar to Eastman Kodak Company (NYSE:KODK). We will take a look at SilverBow Resources, Inc. (NYSE:SBOW), Hovnanian Enterprises, Inc. (NYSE:HOV), VOXX International  (NASDAQ:VOXX), and Airgain, Inc. (NASDAQ:AIRG). This group of stocks' market caps are closest to KODK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBOW,6,68043,1 HOV,8,8758,5 VOXX,8,28594,-1 AIRG,12,6745,6 Average,8.5,28035,2.75 [/table]

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 $28 million. That figure was $14 million in KODK's case. Airgain, Inc. (NASDAQ:AIRG) is the most popular stock in this table. On the other hand SilverBow Resources, Inc. (NYSE:SBOW) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Eastman Kodak Company (NYSE:KODK) is even less popular than SBOW. Hedge funds dodged a bullet by taking a bearish stance towards KODK. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately KODK wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); KODK investors were disappointed as the stock returned 3% during the fourth quarter (through the end of November) 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 so far in Q4.

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

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