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 Total Return Index ETFs returned 27.5% through the end of November. 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 Kimco Realty Corporation (NYSE:KIM).
Is Kimco Realty Corporation (NYSE:KIM) the right investment to pursue these days? The best stock pickers are becoming less hopeful. The number of bullish hedge fund bets were trimmed by 8 in recent months. Our calculations also showed that KIM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). KIM was in 11 hedge funds' portfolios at the end of the third quarter of 2019. There were 19 hedge funds in our database with KIM holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are several gauges stock traders can use to evaluate stocks. A pair of the best gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can trounce the market by a significant amount (see the details here).
[caption id="attachment_746830" align="aligncenter" width="473"] Matthew Hulsizer of PEAK6 Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. Let's check out the recent hedge fund action encompassing Kimco Realty Corporation (NYSE:KIM).
How are hedge funds trading Kimco Realty Corporation (NYSE:KIM)?
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -42% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards KIM over the last 17 quarters. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Kimco Realty Corporation (NYSE:KIM), which was worth $65.6 million at the end of the third quarter. On the second spot was GMT Capital which amassed $17.7 million worth of shares. Adage Capital Management, AQR Capital Management, and PEAK6 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 GMT Capital allocated the biggest weight to Kimco Realty Corporation (NYSE:KIM), around 0.65% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, designating 0.37 percent of its 13F equity portfolio to KIM.
Due to the fact that Kimco Realty Corporation (NYSE:KIM) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of money managers that slashed their entire stakes in the third quarter. Intriguingly, Ken Heebner's Capital Growth Management sold off the largest stake of the 750 funds followed by Insider Monkey, worth an estimated $28.6 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund dropped about $8.1 million worth. These moves are important to note, as total hedge fund interest dropped by 8 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Kimco Realty Corporation (NYSE:KIM) but similarly valued. We will take a look at AGNC Investment Corp. (NASDAQ:AGNC), MGM Growth Properties LLC (NYSE:MGP), Fair Isaac Corporation (NYSE:FICO), and Huntington Ingalls Industries Inc (NYSE:HII). All of these stocks' market caps match KIM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AGNC,15,126937,-8 MGP,18,307511,4 FICO,40,873383,6 HII,19,589653,-4 Average,23,474371,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $474 million. That figure was $100 million in KIM's case. Fair Isaac Corporation (NYSE:FICO) is the most popular stock in this table. On the other hand AGNC Investment Corp. (NASDAQ:AGNC) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Kimco Realty Corporation (NYSE:KIM) is even less popular than AGNC. Hedge funds dodged a bullet by taking a bearish stance towards KIM. 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 KIM wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); KIM investors were disappointed as the stock returned 5% 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.