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Is Kennametal Inc. (NYSE:KMT) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is KMT a good stock to buy now? Kennametal Inc. (NYSE:KMT) investors should be aware of an increase in support from the world's most elite money managers in recent months. Kennametal Inc. (NYSE:KMT) was in 16 hedge funds' portfolios at the end of September. The all time high for this statistic is 30. There were 10 hedge funds in our database with KMT positions at the end of the second quarter. Our calculations also showed that KMT 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.
In the 21st century investor’s toolkit there are tons of gauges investors can use to grade their holdings. Some of the most underrated gauges are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top investment managers can beat the broader indices by a superb margin (see the details here).
John Rogers of Ariel Investments
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. With all of this in mind we're going to review the fresh hedge fund action regarding Kennametal Inc. (NYSE:KMT).
Do Hedge Funds Think KMT Is A Good Stock To Buy Now?
At the end of September, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 60% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in KMT a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Kennametal Inc. (NYSE:KMT) was held by Ariel Investments, which reported holding $171.9 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $23.2 million position. Other investors bullish on the company included GAMCO Investors, Shellback Capital, and GLG Partners. In terms of the portfolio weights assigned to each position Ariel Investments allocated the biggest weight to Kennametal Inc. (NYSE:KMT), around 2.5% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, setting aside 0.43 percent of its 13F equity portfolio to KMT.
As one would reasonably expect, specific money managers have jumped into Kennametal Inc. (NYSE:KMT) headfirst. Fisher Asset Management, managed by Ken Fisher, initiated the most valuable position in Kennametal Inc. (NYSE:KMT). Fisher Asset Management had $23.2 million invested in the company at the end of the quarter. Doug Gordon, Jon Hilsabeck and Don Jabro's Shellback Capital also made a $5.5 million investment in the stock during the quarter. The following funds were also among the new KMT investors: Noam Gottesman's GLG Partners, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and Israel Englander's Millennium Management.
Let's go over hedge fund activity in other stocks similar to Kennametal Inc. (NYSE:KMT). We will take a look at APi Group Corporation (NYSE:APG), Pretium Resources Inc (NYSE:PVG), Compania Cervecerias Unidas S.A. (NYSE:CCU), Manchester United PLC (NYSE:MANU), Altra Industrial Motion Corp. (NASDAQ:AIMC), Broadstone Net Lease, Inc. (NYSE:BNL), and Webster Financial Corporation (NYSE:WBS). This group of stocks' market valuations match KMT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APG,28,1065840,1 PVG,20,211653,-3 CCU,5,20216,-3 MANU,15,47381,4 AIMC,22,118171,10 BNL,12,90873,12 WBS,25,264192,-5 Average,18.1,259761,2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.1 hedge funds with bullish positions and the average amount invested in these stocks was $260 million. That figure was $226 million in KMT's case. APi Group Corporation (NYSE:APG) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) is the least popular one with only 5 bullish hedge fund positions. Kennametal Inc. (NYSE:KMT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KMT is 49.9. 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 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 still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on KMT as the stock returned 30.6% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.