Hedge Funds Are Selling Kronos Worldwide, Inc. (KRO)
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 Kronos Worldwide, Inc. (NYSE:KRO).
Kronos Worldwide, Inc. (NYSE:KRO) has seen a decrease in enthusiasm from smart money recently. Our calculations also showed that KRO 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.
According to most market participants, hedge funds are viewed as worthless, outdated financial vehicles of the past. While there are greater than 8000 funds in operation at the moment, We look at the upper echelon of this group, about 750 funds. These hedge fund managers orchestrate the majority of the hedge fund industry's total capital, and by tailing their best stock picks, Insider Monkey has figured out many investment strategies that have historically outrun Mr. Market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_26073" align="alignnone" width="600"]
Jim Simons of Renaissance Technologies[/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 based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let's review the recent hedge fund action regarding Kronos Worldwide, Inc. (NYSE:KRO).
What have hedge funds been doing with Kronos Worldwide, Inc. (NYSE:KRO)?
At Q3's end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KRO over the last 17 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Kronos Worldwide, Inc. (NYSE:KRO), with a stake worth $17.3 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $8 million. Citadel Investment Group, Zebra Capital Management, 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 Zebra Capital Management allocated the biggest weight to Kronos Worldwide, Inc. (NYSE:KRO), around 0.91% of its 13F portfolio. Caxton Associates is also relatively very bullish on the stock, setting aside 0.07 percent of its 13F equity portfolio to KRO.
Because Kronos Worldwide, Inc. (NYSE:KRO) has witnessed declining sentiment from hedge fund managers, we can see that there is a sect of money managers that elected to cut their full holdings in the third quarter. Interestingly, David Harding's Winton Capital Management dropped the largest investment of all the hedgies monitored by Insider Monkey, comprising an estimated $0.9 million in stock, and Joel Greenblatt's Gotham Asset Management was right behind this move, as the fund dumped about $0.6 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 3 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Kronos Worldwide, Inc. (NYSE:KRO). These stocks are Sonos, Inc. (NASDAQ:SONO), Liberty Media Corporation (NASDAQ:BATRA), New York Mortgage Trust, Inc. (NASDAQ:NYMT), and M/A-COM Technology Solutions Holdings (NASDAQ:MTSI). This group of stocks' market valuations are closest to KRO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SONO,27,100751,6 BATRA,9,68616,0 NYMT,10,25762,0 MTSI,14,197407,-3 Average,15,98134,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $32 million in KRO's case. Sonos, Inc. (NASDAQ:SONO) is the most popular stock in this table. On the other hand Liberty Media Corporation (NASDAQ:BATRA) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Kronos Worldwide, Inc. (NYSE:KRO) is even less popular than BATRA. Hedge funds clearly dropped the ball on KRO as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 KRO as the stock returned 11.3% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
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