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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Kingsway Financial Services Inc. (NYSE:KFS) to find out whether there were any major changes in hedge funds' views.
Is KFS a good stock to buy now? Kingsway Financial Services Inc. (NYSE:KFS) investors should pay attention to an increase in hedge fund sentiment in recent months. Kingsway Financial Services Inc. (NYSE:KFS) was in 3 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that KFS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we're going to analyze the fresh hedge fund action regarding Kingsway Financial Services Inc. (NYSE:KFS).
Do Hedge Funds Think KFS Is A Good Stock To Buy Now?
At the end of March, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KFS over the last 23 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Kingsway Financial Services Inc. (NYSE:KFS), which was worth $1.9 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $0.1 million worth of shares. Millennium Management was 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 Renaissance Technologies allocated the biggest weight to Kingsway Financial Services Inc. (NYSE:KFS), around 0.0024% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, dishing out 0.0001 percent of its 13F equity portfolio to KFS.
As one would reasonably expect, key hedge funds were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, created the most outsized position in Kingsway Financial Services Inc. (NYSE:KFS). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.
Let's now review hedge fund activity in other stocks similar to Kingsway Financial Services Inc. (NYSE:KFS). These stocks are Akarti Therapeutics PLC (NASDAQ:AKTX), Avenue Therapeutics, Inc. (NASDAQ:ATXI), Advanced Emissions Solutions, Inc. (NASDAQ:ADES), RumbleOn, Inc. (NASDAQ:RMBL), Brainsway Ltd. (NASDAQ:BWAY), AIkido Pharma Inc. (NASDAQ:AIKI), and PDS Biotechnology Corporation (NASDAQ:PDSB). This group of stocks' market caps resemble KFS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AKTX,2,423,0 ATXI,1,183,0 ADES,7,18587,-1 RMBL,1,208,1 BWAY,9,21805,8 AIKI,1,395,0 PDSB,3,4879,0 Average,3.4,6640,1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.4 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $2 million in KFS's case. Brainsway Ltd. (NASDAQ:BWAY) is the most popular stock in this table. On the other hand Avenue Therapeutics, Inc. (NASDAQ:ATXI) is the least popular one with only 1 bullish hedge fund positions. Kingsway Financial Services Inc. (NYSE:KFS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KFS is 48.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on KFS, though not to the same extent, as the stock returned 7.5% since the end of Q1 (through June 11th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.