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Were Hedge Funds Right About Betting On Kimco Realty Corp (KIM)?

Abigail Fisher

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Kimco Realty Corp (NYSE:KIM).

Is Kimco Realty Corp (NYSE:KIM) undervalued? The best stock pickers are taking a bullish view. The number of bullish hedge fund positions rose by 8 lately. Our calculations also showed that KIM isn't among the 30 most popular stocks among hedge funds (see the video below). KIM was in 19 hedge funds' portfolios at the end of the second quarter of 2019. There were 11 hedge funds in our database with KIM holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

KIM_oct2019

Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to go over the key hedge fund action regarding Kimco Realty Corp (NYSE:KIM).

What does smart money think about Kimco Realty Corp (NYSE:KIM)?

At Q2's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 73% from the first quarter of 2019. By comparison, 18 hedge funds held shares or bullish call options in KIM a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Ken-Heebner

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the biggest position in Kimco Realty Corp (NYSE:KIM). Renaissance Technologies has a $40.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Capital Growth Management, led by Ken Heebner, holding a $28.6 million position; 2% of its 13F portfolio is allocated to the company. Other peers that hold long positions comprise Phill Gross and Robert Atchinson's Adage Capital Management, Thomas E. Claugus's GMT Capital and Steve Cohen's Point72 Asset Management.

Consequently, some big names were leading the bulls' herd. Capital Growth Management, managed by Ken Heebner, assembled the biggest position in Kimco Realty Corp (NYSE:KIM). Capital Growth Management had $28.6 million invested in the company at the end of the quarter. Thomas E. Claugus's GMT Capital also initiated a $8.5 million position during the quarter. The other funds with brand new KIM positions are Steve Cohen's Point72 Asset Management, Brian Gustavson and Andrew Haley's 1060 Capital Management, and John Overdeck and David Siegel's Two Sigma Advisors.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Kimco Realty Corp (NYSE:KIM) but similarly valued. We will take a look at Store Capital Corporation (NYSE:STOR), Alliance Data Systems Corporation (NYSE:ADS), Telecom Argentina S.A. (NYSE:TEO), and Neurocrine Biosciences, Inc. (NASDAQ:NBIX). All of these stocks' market caps are similar to KIM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STOR,22,987824,0 ADS,34,1420142,-4 TEO,3,54171,-6 NBIX,34,1237372,-1 Average,23.25,924877,-2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $925 million. That figure was $113 million in KIM's case. Alliance Data Systems Corporation (NYSE:ADS) is the most popular stock in this table. On the other hand Telecom Argentina S.A. (NYSE:TEO) is the least popular one with only 3 bullish hedge fund positions. Kimco Realty Corp (NYSE:KIM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on KIM as the stock returned 14.7% during the same time frame and outperformed the market by an even larger margin.

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

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