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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Kimball International Inc (NASDAQ:KBAL).
Is Kimball International Inc (NASDAQ:KBAL) a buy, sell, or hold? Hedge funds were becoming more confident. The number of long hedge fund bets increased by 3 lately. Kimball International Inc (NASDAQ:KBAL) was in 19 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 16. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that KBAL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 16 hedge funds in our database with KBAL positions at the end of the second quarter.
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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Michael Burry of Scion Asset Management
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 recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind let's take a peek at the fresh hedge fund action surrounding Kimball International Inc (NASDAQ:KBAL).
Do Hedge Funds Think KBAL Is A Good Stock To Buy Now?
At the end of September, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in KBAL over the last 21 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Renaissance Technologies has the most valuable position in Kimball International Inc (NASDAQ:KBAL), worth close to $26.6 million, corresponding to less than 0.1%% of its total 13F portfolio. On Renaissance Technologies's heels is Royce & Associates, managed by Chuck Royce, which holds a $18.2 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions include Michael Burry's Scion Asset Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Scion Asset Management allocated the biggest weight to Kimball International Inc (NASDAQ:KBAL), around 1.76% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 0.64 percent of its 13F equity portfolio to KBAL.
As aggregate interest increased, key hedge funds were leading the bulls' herd. Paloma Partners, managed by Donald Sussman, initiated the biggest position in Kimball International Inc (NASDAQ:KBAL). Paloma Partners had $0.2 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $0.1 million investment in the stock during the quarter. The other funds with brand new KBAL positions are Bruce Kovner's Caxton Associates LP and Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Kimball International Inc (NASDAQ:KBAL) but similarly valued. We will take a look at Golden Entertainment Inc (NASDAQ:GDEN), Arrow Financial Corporation (NASDAQ:AROW), BioSpecifics Technologies Corp. (NASDAQ:BSTC), Xenon Pharmaceuticals Inc (NASDAQ:XENE), Ruth's Hospitality Group, Inc. (NASDAQ:RUTH), Resolute Forest Products Inc (NYSE:RFP), and Chuy's Holdings Inc (NASDAQ:CHUY). This group of stocks' market caps resemble KBAL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GDEN,12,67167,-3 AROW,3,10861,0 BSTC,9,48738,1 XENE,26,195443,-1 RUTH,11,39044,-3 RFP,13,170346,5 CHUY,14,33441,-2 Average,12.6,80720,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.6 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $68 million in KBAL's case. Xenon Pharmaceuticals Inc (NASDAQ:XENE) is the most popular stock in this table. On the other hand Arrow Financial Corporation (NASDAQ:AROW) is the least popular one with only 3 bullish hedge fund positions. Kimball International Inc (NASDAQ:KBAL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KBAL is 72.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on KBAL as the stock returned 14.9% since the end of Q3 (through 12/14) 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.