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Is Kforce Inc. (KFRC) Going to Burn These Hedge Funds?

Nina Todic

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.

Kforce Inc. (NASDAQ:KFRC) has seen an increase in support from the world's most elite money managers lately. Our calculations also showed that kfrc isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

Let's take a look at the key hedge fund action regarding Kforce Inc. (NASDAQ:KFRC).

What have hedge funds been doing with Kforce Inc. (NASDAQ:KFRC)?

Heading into the fourth quarter of 2018, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the second quarter of 2018. On the other hand, there were a total of 8 hedge funds with a bullish position in KFRC at the beginning of this year. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with KFRC Positions

The largest stake in Kforce Inc. (NASDAQ:KFRC) was held by Royce & Associates, which reported holding $19.4 million worth of stock at the end of September. It was followed by AQR Capital Management with a $11.8 million position. Other investors bullish on the company included GLG Partners, Millennium Management, and Citadel Investment Group.

As aggregate interest increased, key hedge funds were leading the bulls' herd. Tudor Investment Corp, managed by Paul Tudor Jones, initiated the biggest position in Kforce Inc. (NASDAQ:KFRC). Tudor Investment Corp had $0.9 million invested in the company at the end of the quarter. David Costen Haley's HBK Investments also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Bruce Kovner's Caxton Associates LP and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Kforce Inc. (NASDAQ:KFRC) but similarly valued. These stocks are IRSA Inversiones y Representaciones Sociedad Anónima (NYSE:IRS), TPI Composites, Inc. (NASDAQ:TPIC), Associated Capital Group, Inc. (NYSE:AC), and MTS Systems Corporation (NASDAQ:MTSC). This group of stocks' market valuations match KFRC's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IRS,10,57298,-2 TPIC,17,90246,1 AC,4,73364,0 MTSC,12,120562,-1 Average,10.75,85368,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $78 million in KFRC's case. TPI Composites, Inc. (NASDAQ:TPIC) is the most popular stock in this table. On the other hand Associated Capital Group, Inc. (NYSE:AC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Kforce Inc. (NASDAQ:KFRC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None. This article was originally published at Insider Monkey.

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