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Was The Smart Money Right About Kimberly Clark Corporation (KMB)?

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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Kimberly Clark Corporation (NYSE:KMB).

Is Kimberly Clark Corporation (NYSE:KMB) an attractive stock to buy now? The best stock pickers were becoming hopeful. The number of bullish hedge fund bets moved up by 6 in recent months. Kimberly Clark Corporation (NYSE:KMB) was in 37 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 46. Our calculations also showed that KMB isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Peter Rathjens Arrowstreet Capital 394
Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to check out the new hedge fund action surrounding Kimberly Clark Corporation (NYSE:KMB).

Do Hedge Funds Think KMB Is A Good Stock To Buy Now?

At Q2's end, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KMB over the last 24 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Citadel Investment Group held the most valuable stake in Kimberly Clark Corporation (NYSE:KMB), which was worth $173.5 million at the end of the second quarter. On the second spot was Two Sigma Advisors which amassed $168.6 million worth of shares. Diamond Hill Capital, Arrowstreet Capital, and Bridgewater Associates 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 Te Ahumairangi Investment Management allocated the biggest weight to Kimberly Clark Corporation (NYSE:KMB), around 0.66% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, dishing out 0.59 percent of its 13F equity portfolio to KMB.

Now, specific money managers were leading the bulls' herd. Armistice Capital, managed by Steven Boyd, established the most outsized position in Kimberly Clark Corporation (NYSE:KMB). Armistice Capital had $19.8 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson's Adage Capital Management also initiated a $10 million position during the quarter. The other funds with brand new KMB positions are Paul Marshall and Ian Wace's Marshall Wace LLP, Steve Cohen's Point72 Asset Management, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.

Let's now review hedge fund activity in other stocks similar to Kimberly Clark Corporation (NYSE:KMB). We will take a look at Constellation Brands, Inc. (NYSE:STZ), T. Rowe Price Group, Inc. (NASDAQ:TROW), IHS Markit Ltd. (NYSE:INFO), Agilent Technologies Inc. (NYSE:A), The Bank of New York Mellon Corporation (NYSE:BK), Schlumberger Limited. (NYSE:SLB), and TE Connectivity Ltd. (NYSE:TEL). All of these stocks' market caps are similar to KMB's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STZ,50,1607881,-8 TROW,24,407032,-2 INFO,61,5947551,7 A,39,3891487,-3 BK,52,4907372,3 SLB,41,1067022,-9 TEL,39,2134995,0 Average,43.7,2851906,-1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.7 hedge funds with bullish positions and the average amount invested in these stocks was $2852 million. That figure was $903 million in KMB's case. IHS Markit Ltd. (NYSE:INFO) is the most popular stock in this table. On the other hand T. Rowe Price Group, Inc. (NASDAQ:TROW) is the least popular one with only 24 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 51.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately KMB wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); KMB investors were disappointed as the stock returned -0.4% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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