Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is Kronos Worldwide, Inc. (NYSE:KRO) 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.
Kronos Worldwide, Inc. (NYSE:KRO) has seen an increase in support from the world's most elite money managers in recent months. Our calculations also showed that KRO isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
According to most stock holders, hedge funds are seen as unimportant, old financial tools of yesteryear. While there are greater than 8000 funds trading at present, We choose to focus on the masters of this club, around 850 funds. Most estimates calculate that this group of people oversee bulk of all hedge funds' total capital, and by keeping track of their inimitable stock picks, Insider Monkey has formulated several investment strategies that have historically outstripped the market. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_728376" align="aligncenter" width="400"] Jonathan Barrett of Luminus Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now we're going to take a look at the fresh hedge fund action regarding Kronos Worldwide, Inc. (NYSE:KRO).
What have hedge funds been doing with Kronos Worldwide, Inc. (NYSE:KRO)?
Heading into the first quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 44% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in KRO a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Luminus Management, managed by Jonathan Barrett and Paul Segal, holds the largest position in Kronos Worldwide, Inc. (NYSE:KRO). Luminus Management has a $30.1 million position in the stock, comprising 1.3% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, founded by Jim Simons, which holds a $20.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism include Israel Englander's Millennium Management, Ken Griffin's Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position Luminus Management allocated the biggest weight to Kronos Worldwide, Inc. (NYSE:KRO), around 1.25% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, setting aside 0.58 percent of its 13F equity portfolio to KRO.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Luminus Management, managed by Jonathan Barrett and Paul Segal, initiated the largest position in Kronos Worldwide, Inc. (NYSE:KRO). Luminus Management had $30.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $3.2 million investment in the stock during the quarter. The other funds with brand new KRO positions are Peter Algert and Kevin Coldiron's Algert Coldiron Investors, Donald Sussman's Paloma Partners, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Kronos Worldwide, Inc. (NYSE:KRO) but similarly valued. We will take a look at SciPlay Corporation (NASDAQ:SCPL), NextCure, Inc. (NASDAQ:NXTC), Office Properties Income Trust (NASDAQ:OPI), and Clear Channel Outdoor Holdings, Inc. (NYSE:CCO). All of these stocks' market caps are similar to KRO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SCPL,15,101164,-2 NXTC,17,410458,9 OPI,9,15847,-1 CCO,42,369556,-2 Average,20.75,224256,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $224 million. That figure was $73 million in KRO's case. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) is the most popular stock in this table. On the other hand Office Properties Income Trust (NASDAQ:OPI) is the least popular one with only 9 bullish hedge fund positions. Kronos Worldwide, Inc. (NYSE:KRO) is not the least popular stock in this group but hedge fund interest is still below average. 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 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately KRO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KRO investors were disappointed as the stock returned -37.5% during the same time period 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. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.