Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first quarter, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first quarter still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Kearny Financial Corp. (NASDAQ:KRNY) changed recently.
Kearny Financial Corp. (NASDAQ:KRNY) investors should be aware of an increase in hedge fund sentiment of late. KRNY was in 16 hedge funds' portfolios at the end of March. There were 15 hedge funds in our database with KRNY positions at the end of the previous quarter. Our calculations also showed that KRNY isn't among the 30 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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to take a glance at the key hedge fund action regarding Kearny Financial Corp. (NASDAQ:KRNY).
How are hedge funds trading Kearny Financial Corp. (NASDAQ:KRNY)?
At Q1's end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the fourth quarter of 2018. By comparison, 20 hedge funds held shares or bullish call options in KRNY a year ago. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Kearny Financial Corp. (NASDAQ:KRNY), with a stake worth $77.2 million reported as of the end of March. Trailing Renaissance Technologies was Ancora Advisors, which amassed a stake valued at $15.2 million. Empyrean Capital Partners, MFP Investors, and Prospector Partners were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, some big names have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, created the largest position in Kearny Financial Corp. (NASDAQ:KRNY). Citadel Investment Group had $0.3 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also made a $0.3 million investment in the stock during the quarter. The only other fund with a brand new KRNY position is Matthew Hulsizer's PEAK6 Capital Management.
Let's go over hedge fund activity in other stocks similar to Kearny Financial Corp. (NASDAQ:KRNY). These stocks are Schweitzer-Mauduit International, Inc. (NYSE:SWM), Summit Hotel Properties Inc (NYSE:INN), Encore Wire Corporation (NASDAQ:WIRE), and TriCo Bancshares (NASDAQ:TCBK). This group of stocks' market valuations match KRNY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SWM,10,23959,2 INN,10,14312,-1 WIRE,16,42071,4 TCBK,9,35706,-1 Average,11.25,29012,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $150 million in KRNY's case. Encore Wire Corporation (NASDAQ:WIRE) is the most popular stock in this table. On the other hand TriCo Bancshares (NASDAQ:TCBK) is the least popular one with only 9 bullish hedge fund positions. Kearny Financial Corp. (NASDAQ:KRNY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on KRNY, though not to the same extent, as the stock returned 4.7% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.