Do Hedge Funds Love Kontoor Brands, Inc. (KTB)?
How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Kontoor Brands, Inc. (NASDAQ:KTB) and determine whether hedge funds had an edge regarding this stock.
Kontoor Brands, Inc. (NASDAQ:KTB) was in 18 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 21. KTB shareholders have witnessed an increase in activity from the world's largest hedge funds recently. There were 16 hedge funds in our database with KTB holdings at the end of March. Our calculations also showed that KTB isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Fred DiSanto of Ancora Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we're going to analyze the latest hedge fund action encompassing Kontoor Brands, Inc. (NASDAQ:KTB).
Hedge fund activity in Kontoor Brands, Inc. (NASDAQ:KTB)
At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards KTB over the last 20 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, D E Shaw was the largest shareholder of Kontoor Brands, Inc. (NASDAQ:KTB), with a stake worth $16.5 million reported as of the end of September. Trailing D E Shaw was Arrowstreet Capital, which amassed a stake valued at $11.3 million. Millennium Management, Platinum Asset Management, and Ancora 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 Stormborn Capital Management allocated the biggest weight to Kontoor Brands, Inc. (NASDAQ:KTB), around 3.5% of its 13F portfolio. AWH Capital is also relatively very bullish on the stock, designating 3.32 percent of its 13F equity portfolio to KTB.
With a general bullishness amongst the heavyweights, some big names were leading the bulls' herd. Stormborn Capital Management, managed by Elise Di Vincenzo Crumbine, established the most outsized position in Kontoor Brands, Inc. (NASDAQ:KTB). Stormborn Capital Management had $3 million invested in the company at the end of the quarter. Austin Wiggins Hopper's AWH Capital also made a $1.7 million investment in the stock during the quarter. The following funds were also among the new KTB investors: Benjamin A. Smith's Laurion Capital Management, John Overdeck and David Siegel's Two Sigma Advisors, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Kontoor Brands, Inc. (NASDAQ:KTB) but similarly valued. These stocks are Huron Consulting Group (NASDAQ:HURN), EnPro Industries, Inc. (NYSE:NPO), CSW Industrials, Inc. (NASDAQ:CSWI), First Busey Corporation (NASDAQ:BUSE), Oric Pharmaceuticals, Inc. (NASDAQ:ORIC), Enanta Pharmaceuticals Inc (NASDAQ:ENTA), and Encore Wire Corporation (NASDAQ:WIRE). This group of stocks' market valuations resemble KTB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HURN,11,36397,-6 NPO,17,131944,3 CSWI,19,29123,3 BUSE,13,36069,2 ORIC,11,234522,11 ENTA,20,189133,2 WIRE,20,40069,6 Average,15.9,99608,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $64 million in KTB's case. Enanta Pharmaceuticals Inc (NASDAQ:ENTA) is the most popular stock in this table. On the other hand Huron Consulting Group (NASDAQ:HURN) is the least popular one with only 11 bullish hedge fund positions. Kontoor Brands, Inc. (NASDAQ:KTB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KTB is 71.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on KTB as the stock returned 35.9% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
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