Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of BP Prudhoe Bay Royalty Trust (NYSE:BPT).
BP Prudhoe Bay Royalty Trust (NYSE:BPT) has experienced a decrease in enthusiasm from smart money in recent months. BPT was in 3 hedge funds' portfolios at the end of September. There were 5 hedge funds in our database with BPT holdings at the end of the previous quarter. Our calculations also showed that BPT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most shareholders, hedge funds are perceived as worthless, old investment vehicles of yesteryear. While there are greater than 8000 funds trading at the moment, We look at the upper echelon of this club, approximately 750 funds. These hedge fund managers watch over the lion's share of the smart money's total capital, and by observing their top stock picks, Insider Monkey has formulated many investment strategies that have historically outrun the broader indices. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_673876" align="aligncenter" width="473"] John Overdeck of Two Sigma Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind let's review the fresh hedge fund action encompassing BP Prudhoe Bay Royalty Trust (NYSE:BPT).
Hedge fund activity in BP Prudhoe Bay Royalty Trust (NYSE:BPT)
At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -40% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BPT over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of BP Prudhoe Bay Royalty Trust (NYSE:BPT), with a stake worth $0.8 million reported as of the end of September. Trailing Arrowstreet Capital was Citadel Investment Group, which amassed a stake valued at $0.3 million. Two Sigma Advisors was 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 Arrowstreet Capital allocated the biggest weight to BP Prudhoe Bay Royalty Trust (NYSE:BPT), around 0.002% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, earmarking 0.0005 percent of its 13F equity portfolio to BPT.
Since BP Prudhoe Bay Royalty Trust (NYSE:BPT) has experienced a decline in interest from the aggregate hedge fund industry, it's easy to see that there were a few funds who were dropping their positions entirely heading into Q4. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace said goodbye to the largest stake of the "upper crust" of funds followed by Insider Monkey, comprising about $0.3 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund sold off about $0.2 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as BP Prudhoe Bay Royalty Trust (NYSE:BPT) but similarly valued. These stocks are Shore Bancshares, Inc. (NASDAQ:SHBI), WildBrain Ltd. (NASDAQ:DHXM), Gain Capital Holdings Inc (NYSE:GCAP), and Ideanomics, Inc. (NASDAQ:IDEX). This group of stocks' market caps are closest to BPT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SHBI,3,12669,-1 DHXM,4,57459,0 GCAP,9,21200,0 IDEX,1,23,-3 Average,4.25,22838,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $1 million in BPT's case. Gain Capital Holdings Inc (NYSE:GCAP) is the most popular stock in this table. On the other hand Ideanomics, Inc. (NASDAQ:IDEX) is the least popular one with only 1 bullish hedge fund positions. BP Prudhoe Bay Royalty Trust (NYSE:BPT) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BPT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BPT investors were disappointed as the stock returned -28.3% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.