Hedge funds are known to underperform the bull markets but that's not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index ETFs returned approximately 27.5% through the end of November (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds' consensus stock picks rather than directly investing in hedge funds. 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 Kaman Corporation (NYSE:KAMN).
Kaman Corporation (NYSE:KAMN) was in 19 hedge funds' portfolios at the end of September. KAMN investors should pay attention to an increase in activity from the world's largest hedge funds lately. There were 14 hedge funds in our database with KAMN holdings at the end of the previous quarter. Our calculations also showed that KAMN 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.
At the moment there are tons of gauges stock market investors put to use to grade their stock investments. A couple of the less known gauges are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the best investment managers can outpace the market by a superb amount (see the details here).
[caption id="attachment_375529" align="aligncenter" width="450"] Mario Gabelli of GAMCO Investors[/caption]
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. We're going to take a gander at the fresh hedge fund action surrounding Kaman Corporation (NYSE:KAMN).
What does smart money think about Kaman Corporation (NYSE:KAMN)?
Heading into the fourth quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in KAMN a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Kaman Corporation (NYSE:KAMN) was held by GAMCO Investors, which reported holding $150.6 million worth of stock at the end of September. It was followed by Cardinal Capital with a $44.8 million position. Other investors bullish on the company included Levin Easterly Partners, Millennium Management, and Intrinsic Edge Capital. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to Kaman Corporation (NYSE:KAMN), around 1.48% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 1.25 percent of its 13F equity portfolio to KAMN.
Now, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the most outsized position in Kaman Corporation (NYSE:KAMN). Millennium Management had $11.8 million invested in the company at the end of the quarter. Mark Coe's Intrinsic Edge Capital also initiated a $7.4 million position during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Michael Gelband's ExodusPoint Capital, and Alec Litowitz and Ross Laser's Magnetar Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Kaman Corporation (NYSE:KAMN) but similarly valued. We will take a look at Papa John's International, Inc. (NASDAQ:PZZA), Arcosa, Inc. (NYSE:ACA), Focus Financial Partners Inc. (NASDAQ:FOCS), and Fresh Del Monte Produce Inc (NYSE:FDP). This group of stocks' market caps are closest to KAMN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PZZA,24,382533,2 ACA,27,234791,3 FOCS,10,43591,1 FDP,11,53395,0 Average,18,178578,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $179 million. That figure was $248 million in KAMN's case. Arcosa, Inc. (NYSE:ACA) is the most popular stock in this table. On the other hand Focus Financial Partners Inc. (NASDAQ:FOCS) is the least popular one with only 10 bullish hedge fund positions. Kaman Corporation (NYSE:KAMN) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on KAMN, though not to the same extent, as the stock returned 7% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.