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We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Kilroy Realty Corp (NYSE:KRC) based on that data.
Is KRC a good stock to buy now? Kilroy Realty Corp (NYSE:KRC) was in 19 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 26. KRC has experienced a decrease in support from the world's most elite money managers lately. There were 20 hedge funds in our database with KRC positions at the end of the second quarter. Our calculations also showed that KRC 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.
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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Daniel Sundheim of D1 Capital Partners
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 let's take a glance at the recent hedge fund action surrounding Kilroy Realty Corp (NYSE:KRC).
Do Hedge Funds Think KRC Is A Good Stock To Buy Now?
At Q3's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in KRC over the last 21 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Kilroy Realty Corp (NYSE:KRC) was held by D1 Capital Partners, which reported holding $143.6 million worth of stock at the end of September. It was followed by Long Pond Capital with a $52.8 million position. Other investors bullish on the company included HG Vora Capital Management, Citadel Investment Group, and Millennium Management. In terms of the portfolio weights assigned to each position HG Vora Capital Management allocated the biggest weight to Kilroy Realty Corp (NYSE:KRC), around 3.13% of its 13F portfolio. Hill Winds Capital is also relatively very bullish on the stock, designating 2.59 percent of its 13F equity portfolio to KRC.
Because Kilroy Realty Corp (NYSE:KRC) has witnessed falling interest from the smart money, it's easy to see that there lies a certain "tier" of fund managers who sold off their positions entirely last quarter. At the top of the heap, Dmitry Balyasny's Balyasny Asset Management said goodbye to the biggest investment of the 750 funds monitored by Insider Monkey, comprising about $28.6 million in stock. Phill Gross and Robert Atchinson's fund, Adage Capital Management, also said goodbye to its stock, about $5.7 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Kilroy Realty Corp (NYSE:KRC). These stocks are Credit Acceptance Corp. (NASDAQ:CACC), Smartsheet Inc. (NYSE:SMAR), Dada Nexus Limited (NASDAQ:DADA), Duck Creek Technologies, Inc. (NASDAQ:DCT), American Financial Group, Inc. (NYSE:AFG), Ares Capital Corporation (NASDAQ:ARCC), and RealPage, Inc. (NASDAQ:RP). This group of stocks' market values are closest to KRC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CACC,29,673470,6 SMAR,45,1661963,-2 DADA,17,113051,0 DCT,21,222561,21 AFG,27,278715,-1 ARCC,22,106925,3 RP,39,835449,0 Average,28.6,556019,3.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $556 million. That figure was $328 million in KRC's case. Smartsheet Inc. (NYSE:SMAR) is the most popular stock in this table. On the other hand Dada Nexus Limited (NASDAQ:DADA) is the least popular one with only 17 bullish hedge fund positions. Kilroy Realty Corp (NYSE:KRC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KRC is 29.5. 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. 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 KRC as the stock returned 14% 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.