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Should I Avoid Black Stone Minerals LP (BSM)?

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·6 min read
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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Black Stone Minerals LP (NYSE:BSM) based on those filings.

Black Stone Minerals LP (NYSE:BSM) shareholders have witnessed a decrease in support from the world's most elite money managers in recent months. Black Stone Minerals LP (NYSE:BSM) was in 5 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 8. Our calculations also showed that BSM isn't among the 30 most popular stocks among hedge funds (click for Q1 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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Fred DiSanto Ancora Advisors
Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. Keeping this in mind we're going to take a gander at the latest hedge fund action regarding Black Stone Minerals LP (NYSE:BSM).

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

At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BSM over the last 23 quarters. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

More specifically, Ancora Advisors was the largest shareholder of Black Stone Minerals LP (NYSE:BSM), with a stake worth $7.6 million reported as of the end of March. Trailing Ancora Advisors was Arrowstreet Capital, which amassed a stake valued at $2.6 million. Horizon Asset Management, Citadel Investment Group, and Osmium Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Osmium Partners allocated the biggest weight to Black Stone Minerals LP (NYSE:BSM), around 0.41% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, setting aside 0.21 percent of its 13F equity portfolio to BSM.

Due to the fact that Black Stone Minerals LP (NYSE:BSM) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of hedge funds who sold off their full holdings last quarter. At the top of the heap, MacKenzie B. Davis and Kenneth L. Settles Jr's SailingStone Capital Partners sold off the largest stake of the 750 funds monitored by Insider Monkey, valued at close to $1.7 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund cut about $0.3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.

Let's go over hedge fund activity in other stocks similar to Black Stone Minerals LP (NYSE:BSM). These stocks are Yext, Inc. (NYSE:YEXT), BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX), Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), GCP Applied Technologies Inc. (NYSE:GCP), HudBay Minerals Inc (NYSE:HBM), Sangamo Therapeutics, Inc. (NASDAQ:SGMO), and Cassava Sciences, Inc. (NASDAQ:SAVA). All of these stocks' market caps are closest to BSM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YEXT,13,48039,2 BCRX,22,348348,-4 IRWD,28,449729,2 GCP,13,407749,-4 HBM,15,389989,-4 SGMO,17,91681,-3 SAVA,5,35601,-2 Average,16.1,253019,-1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $13 million in BSM's case. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is the most popular stock in this table. On the other hand Cassava Sciences, Inc. (NASDAQ:SAVA) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Black Stone Minerals LP (NYSE:BSM) is even less popular than SAVA. Our overall hedge fund sentiment score for BSM is 21.8. 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. Hedge funds clearly dropped the ball on BSM as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on BSM as the stock returned 19.6% since Q1 (through June 18th) and outperformed the market by an even larger margin.

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

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