After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of June 28. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards KEMET Corporation (NYSE:KEM).
KEMET Corporation (NYSE:KEM) has seen a decrease in hedge fund interest of late. KEM was in 18 hedge funds' portfolios at the end of June. There were 19 hedge funds in our database with KEM holdings at the end of the previous quarter. Our calculations also showed that KEM isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to review the new hedge fund action surrounding KEMET Corporation (NYSE:KEM).
How are hedge funds trading KEMET Corporation (NYSE:KEM)?
Heading into the third quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in KEM over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Nokomis Capital was the largest shareholder of KEMET Corporation (NYSE:KEM), with a stake worth $29.9 million reported as of the end of March. Trailing Nokomis Capital was Point72 Asset Management, which amassed a stake valued at $26.6 million. Raging Capital Management, Divisar Capital, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as KEMET Corporation (NYSE:KEM) has witnessed falling interest from the smart money, logic holds that there exists a select few money managers that decided to sell off their full holdings heading into Q3. Intriguingly, Mariko Gordon's Daruma Asset Management cut the biggest investment of the 750 funds monitored by Insider Monkey, worth about $17.9 million in stock. Ian Simm's fund, Impax Asset Management, also cut its stock, about $5.3 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 funds heading into Q3.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as KEMET Corporation (NYSE:KEM) but similarly valued. We will take a look at Codexis, Inc. (NASDAQ:CDXS), Matthews International Corp (NASDAQ:MATW), Apollo Investment Corp. (NASDAQ:AINV), and Southside Bancshares, Inc. (NASDAQ:SBSI). This group of stocks' market valuations match KEM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CDXS,12,305243,1 MATW,13,40498,1 AINV,6,30182,-3 SBSI,7,59491,0 Average,9.5,108854,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $147 million in KEM's case. Matthews International Corp (NASDAQ:MATW) is the most popular stock in this table. On the other hand Apollo Investment Corp. (NASDAQ:AINV) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks KEMET Corporation (NYSE:KEM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately KEM wasn't nearly as popular as these 20 stocks and hedge funds that were betting on KEM were disappointed as the stock returned -3.1% during the third quarter 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.