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Is KRG A Good Stock To Buy Now?

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·6 min read
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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 Kite Realty Group Trust (NYSE:KRG) based on those filings.

Is KRG a good stock to buy now? Kite Realty Group Trust (NYSE:KRG) shareholders have witnessed a decrease in activity from the world's largest hedge funds lately. Kite Realty Group Trust (NYSE:KRG) was in 7 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 13. There were 10 hedge funds in our database with KRG positions at the end of the second quarter. Our calculations also showed that KRG 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.

David Siegel of Two Sigma Advisors
David Siegel of Two Sigma Advisors

David Siegel of Two Sigma Advisors

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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. Keeping this in mind we're going to take a gander at the new hedge fund action regarding Kite Realty Group Trust (NYSE:KRG).

Hedge fund activity in Kite Realty Group Trust (NYSE:KRG)

At third quarter's end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in KRG a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Is KRG A Good Stock To Buy?
Is KRG A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Kite Realty Group Trust (NYSE:KRG), with a stake worth $21.5 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $7.3 million. Arrowstreet Capital, Two Sigma Advisors, and AQR Capital Management 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 Quantinno Capital allocated the biggest weight to Kite Realty Group Trust (NYSE:KRG), around 0.22% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to KRG.

Seeing as Kite Realty Group Trust (NYSE:KRG) has experienced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of funds who sold off their entire stakes last quarter. At the top of the heap, David Costen Haley's HBK Investments sold off the largest stake of the "upper crust" of funds watched by Insider Monkey, valued at an estimated $0.5 million in stock. Ken Griffin's fund, Citadel Investment Group, also dropped its stock, about $0.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to Kite Realty Group Trust (NYSE:KRG). These stocks are Myriad Genetics, Inc. (NASDAQ:MYGN), Usa Compression Partners LP (NYSE:USAC), BioXcel Therapeutics, Inc. (NASDAQ:BTAI), Waddell & Reed Financial, Inc. (NYSE:WDR), Matador Resources Co (NYSE:MTDR), New York Mortgage Trust, Inc. (NASDAQ:NYMT), and Atara Biotherapeutics Inc (NASDAQ:ATRA). This group of stocks' market valuations match KRG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MYGN,19,190093,-2 USAC,4,6819,1 BTAI,11,75492,-2 WDR,21,116258,-4 MTDR,16,69003,-7 NYMT,19,42322,4 ATRA,23,458410,1 Average,16.1,136914,-1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $38 million in KRG's case. Atara Biotherapeutics Inc (NASDAQ:ATRA) is the most popular stock in this table. On the other hand Usa Compression Partners LP (NYSE:USAC) is the least popular one with only 4 bullish hedge fund positions. Kite Realty Group Trust (NYSE:KRG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KRG is 26. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on KRG as the stock returned 27% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.

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

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