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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Kronos Worldwide, Inc. (NYSE:KRO) based on that data and determine whether they were really smart about the stock.
Hedge fund interest in Kronos Worldwide, Inc. (NYSE:KRO) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Mesa Laboratories, Inc. (NASDAQ:MLAB), BP Midstream Partners LP (NYSE:BPMP), and Phibro Animal Health Corp (NASDAQ:PAHC) to gather more data points. Our calculations also showed that KRO isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
To most market participants, hedge funds are viewed as worthless, outdated investment vehicles of the past. While there are over 8000 funds with their doors open today, Our researchers hone in on the aristocrats of this group, approximately 850 funds. These hedge fund managers preside over most of all hedge funds' total capital, and by tailing their unrivaled investments, Insider Monkey has found numerous investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outperformed 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 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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Jonathan Barrett of Luminus Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's go over the new hedge fund action regarding Kronos Worldwide, Inc. (NYSE:KRO).
What does smart money think about Kronos Worldwide, Inc. (NYSE:KRO)?
At Q1's end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KRO over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Kronos Worldwide, Inc. (NYSE:KRO), with a stake worth $13.8 million reported as of the end of September. Trailing Renaissance Technologies was Luminus Management, which amassed a stake valued at $10.9 million. Citadel Investment Group, Arrowstreet Capital, and Millennium 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 Luminus Management allocated the biggest weight to Kronos Worldwide, Inc. (NYSE:KRO), around 1.13% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 0.62 percent of its 13F equity portfolio to KRO.
Due to the fact that Kronos Worldwide, Inc. (NYSE:KRO) has faced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of funds that slashed their full holdings heading into Q4. At the top of the heap, Donald Sussman's Paloma Partners cut the largest position of all the hedgies monitored by Insider Monkey, totaling close to $0.3 million in stock, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors was right behind this move, as the fund dumped about $0.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Kronos Worldwide, Inc. (NYSE:KRO). We will take a look at Mesa Laboratories, Inc. (NASDAQ:MLAB), BP Midstream Partners LP (NYSE:BPMP), Phibro Animal Health Corp (NASDAQ:PAHC), and Health Catalyst, Inc (NASDAQ:HCAT). All of these stocks' market caps are closest to KRO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MLAB,7,72515,-3 BPMP,5,6669,-1 PAHC,16,53809,0 HCAT,14,90051,6 Average,10.5,55761,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $36 million in KRO's case. Phibro Animal Health Corp (NASDAQ:PAHC) is the most popular stock in this table. On the other hand BP Midstream Partners LP (NYSE:BPMP) is the least popular one with only 5 bullish hedge fund positions. Kronos Worldwide, Inc. (NYSE:KRO) is not the most popular stock in this group but hedge fund interest is still above average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately KRO wasn't nearly as popular as these 10 stocks and hedge funds that were betting on KRO were disappointed as the stock returned 15.4% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.