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 Kirkland's, Inc. (NASDAQ:KIRK).
Kirkland's, Inc. (NASDAQ:KIRK) investors should be aware of an increase in support from the world's most elite money managers in recent months. KIRK was in 11 hedge funds' portfolios at the end of September. There were 10 hedge funds in our database with KIRK holdings at the end of the previous quarter. Our calculations also showed that KIRK 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.
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.
[caption id="attachment_673876" align="aligncenter" width="473"] John Overdeck of Two Sigma Advisors[/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. We're going to review the fresh hedge fund action regarding Kirkland's, Inc. (NASDAQ:KIRK).
What have hedge funds been doing with Kirkland's, Inc. (NASDAQ:KIRK)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards KIRK over the last 17 quarters. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Kirkland's, Inc. (NASDAQ:KIRK), which was worth $1.6 million at the end of the third quarter. On the second spot was Millennium Management which amassed $1 million worth of shares. Raging Capital Management, Divisar Capital, and Two Sigma Advisors 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 Divisar Capital allocated the biggest weight to Kirkland's, Inc. (NASDAQ:KIRK), around 0.21% of its 13F portfolio. Raging Capital Management is also relatively very bullish on the stock, designating 0.13 percent of its 13F equity portfolio to KIRK.
Consequently, some big names have been driving this bullishness. Raging Capital Management, managed by William C. Martin, established the biggest position in Kirkland's, Inc. (NASDAQ:KIRK). Raging Capital Management had $0.8 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $0 million investment in the stock during the quarter. The only other fund with a new position in the stock is Ken Griffin's Citadel Investment Group.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Kirkland's, Inc. (NASDAQ:KIRK) but similarly valued. We will take a look at Boxlight Corporation (NASDAQ:BOXL), ZK International Group Co., Ltd. (NASDAQ:ZKIN), Diversified Restaurant Holdings, Inc. (NASDAQ:SAUC), and Good Times Restaurants Inc. (NASDAQ:GTIM). This group of stocks' market caps are similar to KIRK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BOXL,1,19,0 ZKIN,1,496,0 SAUC,2,641,-2 GTIM,2,1158,0 Average,1.5,579,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $5 million in KIRK's case. Diversified Restaurant Holdings, Inc. (NASDAQ:SAUC) is the most popular stock in this table. On the other hand Boxlight Corporation (NASDAQ:BOXL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Kirkland's, Inc. (NASDAQ:KIRK) 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 KIRK wasn't nearly as popular as these 20 stocks and hedge funds that were betting on KIRK were disappointed as the stock returned 1.3% 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.