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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Kirkland's, Inc. (NASDAQ:KIRK).
Kirkland's, Inc. (NASDAQ:KIRK) has experienced an increase in hedge fund sentiment of late. Kirkland's, Inc. (NASDAQ:KIRK) was in 21 hedge funds' portfolios at the end of March. The all time high for this statistic was previously 18. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 18 hedge funds in our database with KIRK holdings at the end of December. Our calculations also showed that KIRK isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to check out the recent hedge fund action encompassing Kirkland's, Inc. (NASDAQ:KIRK).
Do Hedge Funds Think KIRK Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in KIRK over the last 23 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, Osmium Partners held the most valuable stake in Kirkland's, Inc. (NASDAQ:KIRK), which was worth $37.8 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $29.3 million worth of shares. Royce & Associates, Intrinsic Edge 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 Osmium Partners allocated the biggest weight to Kirkland's, Inc. (NASDAQ:KIRK), around 34.69% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, dishing out 0.79 percent of its 13F equity portfolio to KIRK.
Now, key money managers were leading the bulls' herd. Royce & Associates, managed by Chuck Royce, assembled the most valuable position in Kirkland's, Inc. (NASDAQ:KIRK). Royce & Associates had $20.6 million invested in the company at the end of the quarter. Mark Coe's Intrinsic Edge Capital also made a $8.8 million investment in the stock during the quarter. The following funds were also among the new KIRK investors: Matthew Hulsizer's PEAK6 Capital Management, D. E. Shaw's D E Shaw, and Michael Gelband's ExodusPoint Capital.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Kirkland's, Inc. (NASDAQ:KIRK) but similarly valued. These stocks are Eros STX Global Corporation (NYSE:ESGC), Athenex, Inc. (NASDAQ:ATNX), HOOKIPA Pharma Inc. (NASDAQ:HOOK), Emerald Holding, Inc. (NYSE:EEX), Sunworks, Inc. (NASDAQ:SUNW), Franklin Covey Co. (NYSE:FC), and West Bancorporation, Inc. (NASDAQ:WTBA). This group of stocks' market values are closest to KIRK's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ESGC,14,50781,7 ATNX,11,74710,-9 HOOK,9,70912,-2 EEX,6,3260,-1 SUNW,6,13293,2 FC,10,16462,1 WTBA,1,7397,-2 Average,8.1,33831,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.1 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $141 million in KIRK's case. Eros STX Global Corporation (NYSE:ESGC) is the most popular stock in this table. On the other hand West Bancorporation, Inc. (NASDAQ:WTBA) 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 overall hedge fund sentiment score for KIRK is 88. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately KIRK wasn't nearly as popular as these 5 stocks and hedge funds that were betting on KIRK were disappointed as the stock returned -31.6% since the end of the first quarter (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.