At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is KeyCorp (NYSE: KEY ) going to take off soon? Prominent investors are becoming less hopeful. The number of bullish hedge fund bets were trimmed by 8 lately. Our calculations also showed that KEY isn't among the 30 most popular stocks among hedge funds . KEY was in 33 hedge funds' portfolios at the end of December. There were 41 hedge funds in our database with KEY positions at the end of the previous quarter.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 ( see the details here ). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to analyze the fresh hedge fund action surrounding KeyCorp (NYSE: KEY ).
What does the smart money think about KeyCorp (NYSE:KEY)?
At the end of the fourth quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KEY over the last 14 quarters. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in KeyCorp (NYSE:KEY) was held by Pzena Investment Management , which reported holding $104.2 million worth of stock at the end of September. It was followed by Millennium Management with a $91 million position. Other investors bullish on the company included Arrowstreet Capital, Basswood Capital, and Adage Capital Management.
Due to the fact that KeyCorp (NYSE:KEY) has faced falling interest from the smart money, we can see that there exists a select few funds that slashed their full holdings heading into Q3. At the top of the heap, Ken Griffin's Citadel Investment Group cut the biggest stake of the "upper crust" of funds tracked by Insider Monkey, worth about $75.7 million in stock. Brandon Haley's fund, Holocene Advisors , also dropped its stock, about $36 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 8 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks similar to KeyCorp (NYSE:KEY). We will take a look at IAC/InterActiveCorp (NASDAQ: IAC ), CGI Inc. (NYSE: GIB ), Diamondback Energy Inc (NASDAQ: FANG ), and Cheniere Energy, Inc. (NYSEAMEX: LNG ). This group of stocks' market values are similar to KEY's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IAC,50,1927773,-1 GIB,17,362855,2 FANG,44,2134858,7 LNG,46,5003221,4 Average,39.25,2357177,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.25 hedge funds with bullish positions and the average amount invested in these stocks was $2357 million. That figure was $383 million in KEY's case. IAC/InterActiveCorp (NASDAQ: IAC ) is the most popular stock in this table. On the other hand CGI Inc. (NYSE: GIB ) is the least popular one with only 17 bullish hedge fund positions. KeyCorp (NYSE:KEY) 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on KEY, though not to the same extent, as the stock returned 18.7% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey .