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Is KeyCorp (NYSE:KEY) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is KEY stock a buy? KeyCorp (NYSE:KEY) investors should pay attention to a decrease in hedge fund sentiment of late. KeyCorp (NYSE:KEY) was in 29 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 46. Our calculations also showed that KEY isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Richard S. Pzena of Pzena Investment Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Now we're going to take a glance at the latest hedge fund action regarding KeyCorp (NYSE:KEY).
Do Hedge Funds Think KEY Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the third quarter of 2020. On the other hand, there were a total of 36 hedge funds with a bullish position in KEY a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Adage Capital Management was the largest shareholder of KeyCorp (NYSE:KEY), with a stake worth $69.6 million reported as of the end of December. Trailing Adage Capital Management was Pzena Investment Management, which amassed a stake valued at $68.2 million. Holocene Advisors, Citadel Investment Group, and D E Shaw 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 Elizabeth Park Capital Management allocated the biggest weight to KeyCorp (NYSE:KEY), around 2.98% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, setting aside 1.82 percent of its 13F equity portfolio to KEY.
Judging by the fact that KeyCorp (NYSE:KEY) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of fund managers who sold off their full holdings last quarter. Intriguingly, Emanuel J. Friedman's EJF Capital cut the biggest investment of the 750 funds tracked by Insider Monkey, totaling an estimated $6 million in stock. Cliff Asness's fund, AQR Capital Management, also dropped its stock, about $3.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as KeyCorp (NYSE:KEY) but similarly valued. We will take a look at Citrix Systems, Inc. (NASDAQ:CTXS), Seagate Technology plc (NASDAQ:STX), Tiffany & Co. (NYSE:TIF), Varian Medical Systems, Inc. (NYSE:VAR), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), SK Telecom Co., Ltd. (NYSE:SKM), and GoodRx Holdings, Inc. (NASDAQ:GDRX). This group of stocks' market caps are similar to KEY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTXS,29,352466,-2 STX,30,2167418,7 TIF,48,2623109,-13 VAR,49,2414410,-3 BMRN,51,1670835,7 SKM,4,104096,0 GDRX,32,556602,-9 Average,34.7,1412705,-1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.7 hedge funds with bullish positions and the average amount invested in these stocks was $1413 million. That figure was $318 million in KEY's case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand SK Telecom Co., Ltd. (NYSE:SKM) is the least popular one with only 4 bullish hedge fund positions. KeyCorp (NYSE:KEY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KEY is 46.5. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. A small number of hedge funds were also right about betting on KEY as the stock returned 28.2% since the end of the fourth quarter (through 4/12) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.