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Were Hedge Funds Right About Flocking Into KT Corporation (KT) ?

Nina Todic

How do we determine whether KT Corporation (NYSE:KT) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Is KT Corporation (NYSE:KT) the right pick for your portfolio? Prominent investors are becoming more confident. The number of long hedge fund positions rose by 3 recently. Our calculations also showed that kt isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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.

[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman, GLG Partners[/caption]

Noam Gottesman GLG Partners

We're going to take a look at the latest hedge fund action surrounding KT Corporation (NYSE:KT).

How are hedge funds trading KT Corporation (NYSE:KT)?

At Q1's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the fourth quarter of 2018. On the other hand, there were a total of 7 hedge funds with a bullish position in KT 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.

No of Hedge Funds with KT Positions

More specifically, Kopernik Global Investors was the largest shareholder of KT Corporation (NYSE:KT), with a stake worth $82.9 million reported as of the end of March. Trailing Kopernik Global Investors was Arrowstreet Capital, which amassed a stake valued at $57.4 million. AQR Capital Management, GLG Partners, and Sensato Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, established the most outsized position in KT Corporation (NYSE:KT). LMR Partners had $10.4 million invested in the company at the end of the quarter. Simon Sadler's Segantii Capital also initiated a $8.2 million position during the quarter. The other funds with brand new KT positions are Dmitry Balyasny's Balyasny Asset Management, Jim Simons's Renaissance Technologies, and Michael Gelband's ExodusPoint Capital.

Let's now take a look at hedge fund activity in other stocks similar to KT Corporation (NYSE:KT). We will take a look at Ultrapar Participacoes SA (NYSE:UGP), Newell Brands Inc. (NASDAQ:NWL), Hanesbrands Inc. (NYSE:HBI), and Dolby Laboratories, Inc. (NYSE:DLB). This group of stocks' market caps are closest to KT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UGP,12,60086,9 NWL,30,1295242,0 HBI,30,523605,2 DLB,29,535572,6 Average,25.25,603626,4.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $604 million. That figure was $267 million in KT's case. Newell Brands Inc. (NASDAQ:NWL) is the most popular stock in this table. On the other hand Ultrapar Participacoes SA (NYSE:UGP) is the least popular one with only 12 bullish hedge fund positions. KT Corporation (NYSE:KT) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately KT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KT investors were disappointed as the stock returned -2.8% 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 13 of these stocks already outperformed the market so far in Q2.

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

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