Was The Smart Money Right About Dumping Kimberly Clark Corporation (KMB)?
Keeping this in mind, let's analyze whether Kimberly Clark Corporation (NYSE:KMB) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Kimberly Clark Corporation (NYSE:KMB) ready to rally soon? Prominent investors were getting less optimistic. The number of bullish hedge fund bets were trimmed by 9 recently. Kimberly Clark Corporation (NYSE:KMB) was in 37 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 46. Our calculations also showed that KMB isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 46 hedge funds in our database with KMB holdings at the end of March.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Mario Gabelli of GAMCO Investors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind let's analyze the key hedge fund action regarding Kimberly Clark Corporation (NYSE:KMB).
Hedge fund activity in Kimberly Clark Corporation (NYSE:KMB)
At Q2's end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 40 hedge funds with a bullish position in KMB 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.
Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in Kimberly Clark Corporation (NYSE:KMB). AQR Capital Management has a $282.6 million position in the stock, comprising 0.5% of its 13F portfolio. On AQR Capital Management's heels is Ric Dillon of Diamond Hill Capital, with a $264.6 million position; 1.6% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism include Brandon Haley's Holocene Advisors, D. E. Shaw's D E Shaw and Renaissance Technologies. In terms of the portfolio weights assigned to each position Diamond Hill Capital allocated the biggest weight to Kimberly Clark Corporation (NYSE:KMB), around 1.56% of its 13F portfolio. Holocene Advisors is also relatively very bullish on the stock, earmarking 1.08 percent of its 13F equity portfolio to KMB.
Due to the fact that Kimberly Clark Corporation (NYSE:KMB) has witnessed declining sentiment from the smart money, it's easy to see that there lies a certain "tier" of hedgies that elected to cut their positions entirely by the end of the second quarter. It's worth mentioning that Michael Hintze's CQS Cayman LP sold off the largest position of all the hedgies monitored by Insider Monkey, valued at close to $16.9 million in stock, and Steven Boyd's Armistice Capital was right behind this move, as the fund sold off about $11.3 million worth. These moves are interesting, as total hedge fund interest dropped by 9 funds by the end of the second quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Kimberly Clark Corporation (NYSE:KMB) but similarly valued. These stocks are ABB Ltd (NYSE:ABB), Spotify Technology S.A. (NYSE:SPOT), Dollar General Corp. (NYSE:DG), Barrick Gold Corporation (NYSE:GOLD), Equinor ASA (NYSE:EQNR), Lam Research Corporation (NASDAQ:LRCX), and The Progressive Corporation (NYSE:PGR). This group of stocks' market valuations are similar to KMB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABB,10,346451,0 SPOT,36,1882209,-4 DG,67,2296237,7 GOLD,52,3360658,-2 EQNR,10,237155,-1 LRCX,62,2537918,8 PGR,50,1147531,-1 Average,41,1686880,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $1687 million. That figure was $1174 million in KMB's case. Dollar General Corp. (NYSE:DG) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 10 bullish hedge fund positions. Kimberly Clark Corporation (NYSE:KMB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KMB is 43.8. 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. 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 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 23% in 2020 through October 30th and surpassed the market again by 20.1 percentage points. Unfortunately KMB wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); KMB investors were disappointed as the stock returned -5.6% since the end of June (through 10/30) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
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