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Kirby Corporation (KEX): These Hedge Funds Were Caught Flat-Footed

Asma UL Husna

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. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Kirby Corporation (NYSE:KEX).

Is Kirby Corporation (NYSE:KEX) a good investment today? Prominent investors are becoming hopeful. The number of bullish hedge fund positions inched up by 5 lately. Our calculations also showed that KEX 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). KEX was in 26 hedge funds' portfolios at the end of December. There were 21 hedge funds in our database with KEX holdings at the end of the previous quarter.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_30602" align="aligncenter" width="399"] Philippe Laffont of Coatue Management[/caption]

COATUE MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Keeping this in mind we're going to take a peek at the recent hedge fund action regarding Kirby Corporation (NYSE:KEX).

What have hedge funds been doing with Kirby Corporation (NYSE:KEX)?

Heading into the first quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in KEX over the last 18 quarters. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

The largest stake in Kirby Corporation (NYSE:KEX) was held by Diamond Hill Capital, which reported holding $217.3 million worth of stock at the end of September. It was followed by Slate Path Capital with a $133.7 million position. Other investors bullish on the company included Royce & Associates, Scopus Asset Management, and D E Shaw. In terms of the portfolio weights assigned to each position StackLine Partners allocated the biggest weight to Kirby Corporation (NYSE:KEX), around 11.75% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, setting aside 7.2 percent of its 13F equity portfolio to KEX.

Consequently, specific money managers have jumped into Kirby Corporation (NYSE:KEX) headfirst. Renaissance Technologies, created the most outsized position in Kirby Corporation (NYSE:KEX). Renaissance Technologies had $7.9 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $1 million investment in the stock during the quarter. The other funds with brand new KEX positions are Joel Greenblatt's Gotham Asset Management, Mika Toikka's AlphaCrest Capital Management, and Philippe Laffont's Coatue Management.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Kirby Corporation (NYSE:KEX) but similarly valued. We will take a look at Exelixis, Inc. (NASDAQ:EXEL), JBG SMITH Properties (NYSE:JBGS), Cimarex Energy Co (NYSE:XEC), and The New York Times Company (NYSE:NYT). This group of stocks' market valuations are closest to KEX's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXEL,23,797055,-7 JBGS,19,269769,-1 XEC,33,976357,1 NYT,35,1407752,-3 Average,27.5,862733,-2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $863 million. That figure was $711 million in KEX's case. The New York Times Company (NYSE:NYT) is the most popular stock in this table. On the other hand JBG SMITH Properties (NYSE:JBGS) is the least popular one with only 19 bullish hedge fund positions. Kirby Corporation (NYSE:KEX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately KEX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KEX investors were disappointed as the stock returned -53.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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