We can judge whether KB Financial Group, Inc. (NYSE:KB) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
KB Financial Group, Inc. (NYSE:KB) has experienced a decrease in hedge fund sentiment in recent months. KB was in 7 hedge funds' portfolios at the end of the third quarter of 2019. There were 9 hedge funds in our database with KB positions at the end of the previous quarter. Our calculations also showed that KB isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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' 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_338852" align="aligncenter" width="2480"] Richard S. Pzena of Pzena Investment Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to analyze the new hedge fund action encompassing KB Financial Group, Inc. (NYSE:KB).
How are hedge funds trading KB Financial Group, Inc. (NYSE:KB)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards KB over the last 17 quarters. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in KB Financial Group, Inc. (NYSE:KB), which was worth $34.9 million at the end of the third quarter. On the second spot was Orbis Investment Management which amassed $6.7 million worth of shares. Millennium Management, Pzena Investment Management, and Marshall Wace 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 Arrowstreet Capital allocated the biggest weight to KB Financial Group, Inc. (NYSE:KB), around 0.08% of its 13F portfolio. Orbis Investment Management is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to KB.
Seeing as KB Financial Group, Inc. (NYSE:KB) has faced falling interest from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of fund managers that slashed their full holdings in the third quarter. Interestingly, Noam Gottesman's GLG Partners dumped the largest position of the 750 funds watched by Insider Monkey, valued at close to $0.5 million in stock. Ken Fisher's fund, Fisher Asset Management, also sold off its stock, about $0.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds in the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as KB Financial Group, Inc. (NYSE:KB) but similarly valued. We will take a look at Freeport-McMoRan Inc. (NYSE:FCX), Seattle Genetics, Inc. (NASDAQ:SGEN), Cardinal Health, Inc. (NYSE:CAH), and CNH Industrial NV (NYSE:CNHI). This group of stocks' market caps resemble KB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FCX,37,1012669,4 SGEN,27,4587575,10 CAH,25,776365,-3 CNHI,14,341649,0 Average,25.75,1679565,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $1680 million. That figure was $46 million in KB's case. Freeport-McMoRan Inc. (NYSE:FCX) is the most popular stock in this table. On the other hand CNH Industrial NV (NYSE:CNHI) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks KB Financial Group, Inc. (NYSE:KB) is even less popular than CNHI. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on KB, though not to the same extent, as the stock returned 9.2% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.