In this article you are going to find out whether hedge funds think KBR, Inc. (NYSE:KBR) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is KBR a good stock to buy now? KBR, Inc. (NYSE:KBR) was in 38 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. KBR has experienced an increase in activity from the world's largest hedge funds recently. There were 35 hedge funds in our database with KBR positions at the end of the second quarter. Our calculations also showed that KBR isn't among the 30 most popular stocks among hedge funds (click for Q3 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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
Scott Ferguson of Sachem Head Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to take a look at the latest hedge fund action encompassing KBR, Inc. (NYSE:KBR).
Do Hedge Funds Think KBR Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the second quarter of 2020. On the other hand, there were a total of 31 hedge funds with a bullish position in KBR a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, Sachem Head Capital held the most valuable stake in KBR, Inc. (NYSE:KBR), which was worth $88.3 million at the end of the third quarter. On the second spot was Millennium Management which amassed $72.5 million worth of shares. Suvretta Capital Management, Scopia Capital, and Royce & Associates 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 Engine Capital allocated the biggest weight to KBR, Inc. (NYSE:KBR), around 14.32% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, designating 11.88 percent of its 13F equity portfolio to KBR.
As aggregate interest increased, some big names have jumped into KBR, Inc. (NYSE:KBR) headfirst. P2 Capital Partners, managed by Claus Moller, assembled the largest position in KBR, Inc. (NYSE:KBR). P2 Capital Partners had $30.2 million invested in the company at the end of the quarter. David Brown's Hawk Ridge Management also made a $15.5 million investment in the stock during the quarter. The following funds were also among the new KBR investors: David Rosen's Rubric Capital Management, Jeffrey Bronchick's Cove Street Capital, and Andrew Byington's Appian Way Asset Management.
Let's check out hedge fund activity in other stocks similar to KBR, Inc. (NYSE:KBR). These stocks are Portland General Electric Company (NYSE:POR), SAGE Therapeutics Inc (NASDAQ:SAGE), Safehold Inc. (NYSE:SAFE), Vivint Smart Home, Inc. (NYSE:VVNT), National Beverage Corp. (NASDAQ:FIZZ), The Howard Hughes Corporation (NYSE:HHC), and PTC Therapeutics, Inc. (NASDAQ:PTCT). This group of stocks' market valuations resemble KBR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position POR,24,178843,3 SAGE,34,716348,4 SAFE,7,7299,0 VVNT,5,8042,0 FIZZ,23,300383,2 HHC,31,858126,3 PTCT,25,209866,-6 Average,21.3,325558,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.3 hedge funds with bullish positions and the average amount invested in these stocks was $326 million. That figure was $626 million in KBR's case. SAGE Therapeutics Inc (NASDAQ:SAGE) is the most popular stock in this table. On the other hand Vivint Smart Home, Inc. (NYSE:VVNT) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks KBR, Inc. (NYSE:KBR) is more popular among hedge funds. Our overall hedge fund sentiment score for KBR is 88. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on KBR as the stock returned 32.3% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.