Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With this in mind let's see whether Kinsale Capital Group, Inc. (NASDAQ:KNSL) makes for a good investment at the moment. We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Kinsale Capital Group, Inc. (NASDAQ:KNSL) was in 11 hedge funds' portfolios at the end of the fourth quarter of 2019. KNSL has seen a decrease in enthusiasm from smart money in recent months. There were 12 hedge funds in our database with KNSL holdings at the end of the previous quarter. Our calculations also showed that KNSL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
According to most stock holders, hedge funds are viewed as worthless, old investment vehicles of yesteryear. While there are more than 8000 funds in operation today, Our experts choose to focus on the aristocrats of this group, approximately 850 funds. These money managers orchestrate the lion's share of the smart money's total asset base, and by tailing their finest equity investments, Insider Monkey has discovered numerous investment strategies that have historically exceeded Mr. Market. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_746830" align="aligncenter" width="399"] Matthew Hulsizer of PEAK6 Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now we're going to go over the fresh hedge fund action surrounding Kinsale Capital Group, Inc. (NASDAQ:KNSL).
How have hedgies been trading Kinsale Capital Group, Inc. (NASDAQ:KNSL)?
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in KNSL a year ago. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Kinsale Capital Group, Inc. (NASDAQ:KNSL) was held by Driehaus Capital, which reported holding $16 million worth of stock at the end of September. It was followed by PEAK6 Capital Management with a $5.3 million position. Other investors bullish on the company included AQR Capital Management, D E Shaw, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Driehaus Capital allocated the biggest weight to Kinsale Capital Group, Inc. (NASDAQ:KNSL), around 0.43% of its 13F portfolio. Qtron Investments is also relatively very bullish on the stock, setting aside 0.14 percent of its 13F equity portfolio to KNSL.
Judging by the fact that Kinsale Capital Group, Inc. (NASDAQ:KNSL) has witnessed bearish sentiment from the smart money, it's easy to see that there lies a certain "tier" of funds that decided to sell off their positions entirely by the end of the third quarter. It's worth mentioning that D. E. Shaw's D E Shaw sold off the biggest stake of all the hedgies watched by Insider Monkey, totaling about $4.6 million in stock. Steve Cohen's fund, Point72 Asset Management, also said goodbye to its stock, about $3.4 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks similar to Kinsale Capital Group, Inc. (NASDAQ:KNSL). These stocks are Plexus Corp. (NASDAQ:PLXS), SPX Corporation (NYSE:SPXC), Northwest Natural Holding Company (NYSE:NWN), and Epizyme Inc (NASDAQ:EPZM). All of these stocks' market caps resemble KNSL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLXS,24,119833,16 SPXC,19,121935,0 NWN,17,97409,-1 EPZM,18,610687,1 Average,19.5,237466,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $25 million in KNSL's case. Plexus Corp. (NASDAQ:PLXS) is the most popular stock in this table. On the other hand Northwest Natural Holding Company (NYSE:NWN) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Kinsale Capital Group, Inc. (NASDAQ:KNSL) is even less popular than NWN. Hedge funds clearly dropped the ball on KNSL as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but still beat the market by 4.2 percentage points. A small number of hedge funds were also right about betting on KNSL as the stock returned 5.8% during the same time period and outperformed the market by an even larger margin. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.