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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Kimberly Clark Corporation (NYSE:KMB)? The smart money sentiment can provide an answer to this question.
Is KMB a good stock to buy now? Investors who are in the know were becoming more confident. The number of bullish hedge fund bets went up by 4 lately. Kimberly Clark Corporation (NYSE:KMB) was in 41 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 46. Our calculations also showed that KMB 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). There were 37 hedge funds in our database with KMB holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
If you'd ask most shareholders, hedge funds are perceived as underperforming, outdated investment tools of years past. While there are more than 8000 funds trading at present, Our experts look at the elite of this club, around 850 funds. These hedge fund managers command most of the smart money's total asset base, and by observing their matchless investments, Insider Monkey has identified a few investment strategies that have historically outperformed the market. Insider Monkey's flagship short hedge fund strategy exceeded 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 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Alex Litowitz of Magnetar Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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 let's view the new hedge fund action encompassing Kimberly Clark Corporation (NYSE:KMB).
Do Hedge Funds Think KMB Is A Good Stock To Buy Now?
At Q3's end, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. On the other hand, there were a total of 42 hedge funds with a bullish position in KMB a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Diamond Hill Capital held the most valuable stake in Kimberly Clark Corporation (NYSE:KMB), which was worth $275 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $245.4 million worth of shares. Two Sigma Advisors, Renaissance Technologies, and GLG Partners 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 Diamond Hill Capital allocated the biggest weight to Kimberly Clark Corporation (NYSE:KMB), around 1.52% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, setting aside 0.59 percent of its 13F equity portfolio to KMB.
Consequently, specific money managers were breaking ground themselves. Bridgewater Associates, managed by Ray Dalio, created the most valuable position in Kimberly Clark Corporation (NYSE:KMB). Bridgewater Associates had $24.9 million invested in the company at the end of the quarter. Parvinder Thiara's Athanor Capital also made a $4.9 million investment in the stock during the quarter. The other funds with brand new KMB positions are Matthew Hulsizer's PEAK6 Capital Management, Alec Litowitz and Ross Laser's Magnetar Capital, and Qing Li's Sciencast Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Kimberly Clark Corporation (NYSE:KMB) but similarly valued. These stocks are The Bank of Nova Scotia (NYSE:BNS), Barrick Gold Corporation (NYSE:GOLD), Brookfield Asset Management Inc. (NYSE:BAM), Edwards Lifesciences Corporation (NYSE:EW), China Petroleum & Chemical Corp (NYSE:SNP), Lam Research Corporation (NASDAQ:LRCX), and Waste Management, Inc. (NYSE:WM). All of these stocks' market caps are similar to KMB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BNS,14,175517,1 GOLD,52,3095841,0 BAM,35,1080514,2 EW,46,1122952,1 SNP,8,168584,-2 LRCX,55,2247749,-7 WM,38,2845066,-1 Average,35.4,1533746,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.4 hedge funds with bullish positions and the average amount invested in these stocks was $1534 million. That figure was $1510 million in KMB's case. Lam Research Corporation (NASDAQ:LRCX) is the most popular stock in this table. On the other hand China Petroleum & Chemical Corp (NYSE:SNP) is the least popular one with only 8 bullish hedge fund positions. Kimberly Clark Corporation (NYSE:KMB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KMB is 70.8. 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 positive signal but 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 beat the market again by 15.8 percentage points. Unfortunately KMB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on KMB were disappointed as the stock returned -7.2% 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.