The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about KBR, Inc. (NYSE:KBR)?
KBR, Inc. (NYSE:KBR) investors should pay attention to a decrease in activity from the world's largest hedge funds recently. Our calculations also showed that KBR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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_339352" align="aligncenter" width="400"] Joe Huber of Huber Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to check out the fresh hedge fund action encompassing KBR, Inc. (NYSE:KBR).
What have hedge funds been doing with KBR, Inc. (NYSE:KBR)?
At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in KBR a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Aaron Cowen's Suvretta Capital Management has the largest position in KBR, Inc. (NYSE:KBR), worth close to $64.4 million, corresponding to 1.7% of its total 13F portfolio. Sitting at the No. 2 spot is Millennium Management, managed by Israel Englander, which holds a $56.6 million position; 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions include Joe Huber's Huber Capital Management, Chuck Royce's Royce & Associates and Dmitry Balyasny's Balyasny Asset Management. In terms of the portfolio weights assigned to each position Huber Capital Management allocated the biggest weight to KBR, Inc. (NYSE:KBR), around 10.07% of its 13F portfolio. MIK Capital is also relatively very bullish on the stock, setting aside 7.3 percent of its 13F equity portfolio to KBR.
Judging by the fact that KBR, Inc. (NYSE:KBR) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of hedgies who sold off their entire stakes in the first quarter. At the top of the heap, Guy Shahar's DSAM Partners said goodbye to the biggest position of the "upper crust" of funds followed by Insider Monkey, totaling close to $19.3 million in stock. Carson Yost's fund, Yost Capital Management, also dropped its stock, about $12.3 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 funds in the first quarter.
Let's check out hedge fund activity in other stocks similar to KBR, Inc. (NYSE:KBR). These stocks are Noble Energy, Inc. (NYSE:NBL), Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), Mantech International Corp (NASDAQ:MANT), and Crane Co. (NYSE:CR). This group of stocks' market values resemble KBR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NBL,35,382923,7 ARWR,22,160633,-4 MANT,17,32174,-6 CR,26,197568,3 Average,25,193325,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $425 million in KBR's case. Noble Energy, Inc. (NYSE:NBL) is the most popular stock in this table. On the other hand Mantech International Corp (NASDAQ:MANT) is the least popular one with only 17 bullish hedge fund positions. KBR, Inc. (NYSE:KBR) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately KBR wasn't nearly as popular as these 10 stocks and hedge funds that were betting on KBR were disappointed as the stock returned 13.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.