Published on 26 Oct 2021 on Insider Monkey via Yahoo Finance
Is KAR Auction Services Inc (KAR) A Good Stock To Buy?
Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards KAR Auction Services Inc (NYSE:KAR) to find out whether there were any major changes in hedge funds' views.
Is KAR a good stock to buy? The smart money was taking a bullish view. The number of long hedge fund positions inched up by 1 lately. KAR Auction Services Inc (NYSE:KAR) was in 23 hedge funds' portfolios at the end of June. The all time high for this statistic is 44. Our calculations also showed that KAR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 22 hedge funds in our database with KAR holdings at the end of March.
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.