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Hedge Funds Are Selling Kirby Corporation (KEX)

Nina Todic

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Kirby Corporation (NYSE:KEX).

Is Kirby Corporation (NYSE:KEX) worth your attention right now? The smart money is getting less bullish. The number of long hedge fund positions fell by 3 in recent months. Our calculations also showed that KEX 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.

5 Most Popular Stocks Among Hedge Funds

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_758429" align="aligncenter" width="450"] Ric Dillon of Diamond Hill Capital[/caption]

Ric Dillon Diamond Hill Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's analyze the fresh hedge fund action regarding Kirby Corporation (NYSE:KEX).

What have hedge funds been doing with Kirby Corporation (NYSE:KEX)?

Heading into the fourth quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in KEX a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

More specifically, Diamond Hill Capital was the largest shareholder of Kirby Corporation (NYSE:KEX), with a stake worth $203.3 million reported as of the end of September. Trailing Diamond Hill Capital was Slate Path Capital, which amassed a stake valued at $112.1 million. Royce & Associates, Scopus Asset Management, and D E Shaw 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 StackLine Partners allocated the biggest weight to Kirby Corporation (NYSE:KEX), around 11.18% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, designating 7.43 percent of its 13F equity portfolio to KEX.

Because Kirby Corporation (NYSE:KEX) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of money managers who were dropping their positions entirely heading into Q4. Intriguingly, Clint Murray's Lodge Hill Capital dumped the largest stake of the 750 funds tracked by Insider Monkey, worth an estimated $13.6 million in stock, and Till Bechtolsheimer's Arosa Capital Management was right behind this move, as the fund said goodbye to about $4.4 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 3 funds heading into Q4.

Let's now take a look at hedge fund activity in other stocks similar to Kirby Corporation (NYSE:KEX). These stocks are 51job, Inc. (NASDAQ:JOBS), United Microelectronics Corporation (NYSE:UMC), Flowers Foods, Inc. (NYSE:FLO), and Generac Holdings Inc. (NYSE:GNRC). All of these stocks' market caps match KEX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JOBS,7,18805,-2 UMC,13,97504,1 FLO,28,244376,6 GNRC,30,289728,5 Average,19.5,162603,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $663 million in KEX's case. Generac Holdings Inc. (NYSE:GNRC) is the most popular stock in this table. On the other hand 51job, Inc. (NASDAQ:JOBS) is the least popular one with only 7 bullish hedge fund positions. Kirby Corporation (NYSE:KEX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately KEX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on KEX were disappointed as the stock returned 2.7% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Disclosure: None. This article was originally published at Insider Monkey.

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