Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Kraton Corporation (NYSE:KRA) based on that data.
Kraton Corporation (NYSE:KRA) was in 14 hedge funds' portfolios at the end of the first quarter of 2020. KRA shareholders have witnessed a decrease in activity from the world's largest hedge funds in recent months. There were 19 hedge funds in our database with KRA positions at the end of the previous quarter. Our calculations also showed that KRA isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_189625" align="aligncenter" width="396"] Tom Sandell of Sandell Asset Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's view the recent hedge fund action encompassing Kraton Corporation (NYSE:KRA).
What does smart money think about Kraton Corporation (NYSE:KRA)?
Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the fourth quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in KRA a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Chuck Royce's Royce & Associates has the most valuable position in Kraton Corporation (NYSE:KRA), worth close to $6.4 million, accounting for 0.1% of its total 13F portfolio. The second largest stake is held by Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions comprise Tom Sandell's Sandell Asset Management, Renaissance Technologies and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Lyon Street Capital allocated the biggest weight to Kraton Corporation (NYSE:KRA), around 1.82% of its 13F portfolio. Sandell Asset Management is also relatively very bullish on the stock, setting aside 0.66 percent of its 13F equity portfolio to KRA.
Because Kraton Corporation (NYSE:KRA) has faced bearish sentiment from hedge fund managers, logic holds that there lies a certain "tier" of hedgies who sold off their entire stakes heading into Q4. Intriguingly, Noam Gottesman's GLG Partners said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, valued at close to $3.2 million in stock. Michael Price's fund, MFP Investors, also said goodbye to its stock, about $2.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 5 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Kraton Corporation (NYSE:KRA) but similarly valued. These stocks are TransMedics Group, Inc. (NASDAQ:TMDX), Oppenheimer Holdings Inc. (NYSE:OPY), Syros Pharmaceuticals, Inc. (NASDAQ:SYRS), and Atlas Technical Consultants, Inc. (NASDAQ:ATCX). This group of stocks' market caps resemble KRA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TMDX,3,48101,-2 OPY,9,22234,1 SYRS,11,43061,-2 ATCX,11,11058,0 Average,8.5,31114,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $23 million in KRA's case. Syros Pharmaceuticals, Inc. (NASDAQ:SYRS) is the most popular stock in this table. On the other hand TransMedics Group, Inc. (NASDAQ:TMDX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Kraton Corporation (NYSE:KRA) is more popular among hedge funds. 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 returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on KRA as the stock returned 106.8% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.