Is Kaiser Aluminum Corp. (KALU) A Good Stock To Buy?

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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 30th. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Kaiser Aluminum Corp. (NASDAQ:KALU).

Is Kaiser Aluminum Corp. (NASDAQ:KALU) a buy, sell, or hold? Hedge funds were taking a bearish view. The number of bullish hedge fund bets retreated by 3 recently. Kaiser Aluminum Corp. (NASDAQ:KALU) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 21. Our calculations also showed that KALU isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Richard Driehaus of Driehaus Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. 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 let’s take a peek at the new hedge fund action encompassing Kaiser Aluminum Corp. (NASDAQ:KALU).

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

At second quarter’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards KALU over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Kaiser Aluminum Corp. (NASDAQ:KALU) was held by Fisher Asset Management, which reported holding $22.1 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $16.2 million position. Other investors bullish on the company included Driehaus Capital, Third Avenue Management, and PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Third Avenue Management allocated the biggest weight to Kaiser Aluminum Corp. (NASDAQ:KALU), around 0.85% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, designating 0.13 percent of its 13F equity portfolio to KALU.

Because Kaiser Aluminum Corp. (NASDAQ:KALU) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there is a sect of money managers who were dropping their positions entirely last quarter. Interestingly, Michael Price’s MFP Investors sold off the biggest investment of the 750 funds monitored by Insider Monkey, valued at about $1.6 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund sold off about $0.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Kaiser Aluminum Corp. (NASDAQ:KALU). We will take a look at Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY), Lordstown Motors Corp. (NASDAQ:RIDE), Trustmark Corp (NASDAQ:TRMK), Arcus Biosciences, Inc. (NYSE:RCUS), Washington Real Estate Investment Trust (NYSE:WRE), iRhythm Technologies, Inc. (NASDAQ:IRTC), and Inovio Pharmaceuticals Inc (NASDAQ:INO). This group of stocks’ market caps match KALU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLAY 28 408648 4
RIDE 12 27117 0
TRMK 10 13769 3
RCUS 22 403654 -5
WRE 7 37013 -3
IRTC 22 215499 3
INO 8 37439 -3
Average 15.6 163306 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $66 million in KALU’s case. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) is the most popular stock in this table. On the other hand Washington Real Estate Investment Trust (NYSE:WRE) is the least popular one with only 7 bullish hedge fund positions. Kaiser Aluminum Corp. (NASDAQ:KALU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KALU is 23.4. 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 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately KALU wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); KALU investors were disappointed as the stock returned -8% since the end of June (through 9/27) 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.