"Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum," said Clearbridge Investments in its market commentary. We aren't sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards KT Corporation (NYSE:KT).
Is KT Corporation (NYSE:KT) the right pick for your portfolio? The smart money is taking an optimistic view. The number of long hedge fund bets improved by 7 in recent months. Our calculations also showed that KT isn't among the 30 most popular stocks among hedge funds. KT was in 16 hedge funds' portfolios at the end of December. There were 9 hedge funds in our database with KT holdings at the end of the previous quarter.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the recent hedge fund action surrounding KT Corporation (NYSE:KT).
What does the smart money think about KT Corporation (NYSE:KT)?
At the end of the fourth quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 78% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards KT over the last 14 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in KT Corporation (NYSE:KT) was held by Arrowstreet Capital, which reported holding $68.5 million worth of stock at the end of September. It was followed by Kopernik Global Investors with a $67.8 million position. Other investors bullish on the company included AQR Capital Management, GLG Partners, and Sensato Capital Management.
As industrywide interest jumped, specific money managers were leading the bulls' herd. Millennium Management, managed by Israel Englander, assembled the largest position in KT Corporation (NYSE:KT). Millennium Management had $15 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $2.1 million position during the quarter. The other funds with new positions in the stock are Ronald Hua's Qtron Investments, David Costen Haley's HBK Investments, and Ken Griffin's Citadel Investment Group.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as KT Corporation (NYSE:KT) but similarly valued. We will take a look at Erie Indemnity Company (NASDAQ:ERIE), GrubHub Inc (NYSE:GRUB), Graco Inc. (NYSE:GGG), and Bio-Rad Laboratories, Inc. (NYSE:BIO). This group of stocks' market caps resemble KT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ERIE,11,71198,-3 GRUB,23,860282,-15 GGG,18,196236,-4 BIO,35,684500,-3 Average,21.75,453054,-6.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $453 million. That figure was $271 million in KT's case. Bio-Rad Laboratories, Inc. (NYSE:BIO) is the most popular stock in this table. On the other hand Erie Indemnity Company (NASDAQ:ERIE) is the least popular one with only 11 bullish hedge fund positions. KT Corporation (NYSE:KT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately KT wasn't in this group. Hedge funds that bet on KT were disappointed as the stock lost 11.3% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.