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Is KL A Good Stock To Buy Now According To Hedge Funds?

Debasis Saha
·6 min read

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Kirkland Lake Gold Ltd. (NYSE:KL) based on those filings.

Is KL a good stock to buy now? Kirkland Lake Gold Ltd. (NYSE:KL) was in 22 hedge funds' portfolios at the end of September. The all time high for this statistic is 28. KL investors should pay attention to a decrease in enthusiasm from smart money lately. There were 23 hedge funds in our database with KL holdings at the end of June. Our calculations also showed that KL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

PAULSON & CO
PAULSON & CO

John Paulson of Paulson & Co

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 peek at the latest hedge fund action surrounding Kirkland Lake Gold Ltd. (NYSE:KL).

Do Hedge Funds Think KL Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in KL 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.

Is KL A Good Stock To Buy?
Is KL A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Kirkland Lake Gold Ltd. (NYSE:KL), which was worth $206.1 million at the end of the third quarter. On the second spot was Paulson & Co which amassed $73.1 million worth of shares. Waratah Capital Advisors, Galibier Capital Management, and Citadel Investment Group 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 Greywolf Capital Management allocated the biggest weight to Kirkland Lake Gold Ltd. (NYSE:KL), around 26.8% of its 13F portfolio. Galibier Capital Management is also relatively very bullish on the stock, setting aside 7.92 percent of its 13F equity portfolio to KL.

Judging by the fact that Kirkland Lake Gold Ltd. (NYSE:KL) has experienced bearish sentiment from the smart money, it's easy to see that there exists a select few hedgies that decided to sell off their positions entirely heading into Q4. At the top of the heap, Eric Sprott's Sprott Asset Management said goodbye to the biggest stake of the "upper crust" of funds watched by Insider Monkey, worth an estimated $69.3 million in stock. Louis Bacon's fund, Moore Global Investments, also dropped its stock, about $10.6 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds heading into Q4.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Kirkland Lake Gold Ltd. (NYSE:KL) but similarly valued. We will take a look at Markel Corporation (NYSE:MKL), Pool Corporation (NASDAQ:POOL), Carnival Corporation (NYSE:CCL), POSCO (NYSE:PKX), J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), HubSpot Inc (NYSE:HUBS), and Mid America Apartment Communities Inc (NYSE:MAA). All of these stocks' market caps are similar to KL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MKL,34,1014655,1 POOL,36,916971,1 CCL,37,285153,6 PKX,11,87343,1 JBHT,38,329247,14 HUBS,40,1187421,-1 MAA,27,449666,-3 Average,31.9,610065,2.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.9 hedge funds with bullish positions and the average amount invested in these stocks was $610 million. That figure was $514 million in KL's case. HubSpot Inc (NYSE:HUBS) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 11 bullish hedge fund positions. Kirkland Lake Gold Ltd. (NYSE:KL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KL 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. 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 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately KL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KL investors were disappointed as the stock returned -19.9% since the end of September (through 12/14) 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 2020.

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

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