Should You Buy Star Gas Partners, L.P. (SGU)?
Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Star Gas Partners, L.P. (NYSE:SGU).
Hedge fund interest in Star Gas Partners, L.P. (NYSE:SGU) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Myovant Sciences Ltd. (NYSE:MYOV), Akebia Therapeutics Inc (NASDAQ:AKBA), and Gilat Satellite Networks Ltd. (NASDAQ:GILT) to gather more data points. Our calculations also showed that SGU 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.
If you'd ask most traders, hedge funds are viewed as worthless, old financial vehicles of the past. While there are greater than 8000 funds with their doors open today, Our researchers look at the top tier of this group, about 750 funds. These hedge fund managers command the lion's share of the hedge fund industry's total asset base, and by tailing their finest stock picks, Insider Monkey has unearthed numerous investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a 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 .
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Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the recent hedge fund action surrounding Star Gas Partners, L.P. (NYSE:SGU).
What have hedge funds been doing with Star Gas Partners, L.P. (NYSE:SGU)?
At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SGU over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Gregory Bylinsky and Jefferson Gramm's Bandera Partners has the most valuable position in Star Gas Partners, L.P. (NYSE:SGU), worth close to $27.8 million, corresponding to 17.5% of its total 13F portfolio. The second most bullish fund manager is Moab Capital Partners, managed by Michael M. Rothenberg, which holds a $19.5 million position; 7.4% of its 13F portfolio is allocated to the company. Other peers that are bullish comprise Stephen J. Errico's Locust Wood Capital Advisers,Alexander Captain's Cat Rock Capital. In terms of the portfolio weights assigned to each position Bandera Partners allocated the biggest weight to Star Gas Partners, L.P. (NYSE:SGU), around 17.51% of its 13F portfolio. Moab Capital Partners is also relatively very bullish on the stock, designating 7.4 percent of its 13F equity portfolio to SGU.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now take a look at hedge fund activity in other stocks similar to Star Gas Partners, L.P. (NYSE:SGU). These stocks are Myovant Sciences Ltd. (NYSE:MYOV), Akebia Therapeutics Inc (NASDAQ:AKBA), Gilat Satellite Networks Ltd. (NASDAQ:GILT), and Forterra, Inc. (NASDAQ:FRTA). This group of stocks' market caps are closest to SGU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MYOV,14,40493,6 AKBA,15,156509,1 GILT,2,25553,0 FRTA,13,73440,2 Average,11,73999,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $81 million in SGU's case. Akebia Therapeutics Inc (NASDAQ:AKBA) is the most popular stock in this table. On the other hand Gilat Satellite Networks Ltd. (NASDAQ:GILT) is the least popular one with only 2 bullish hedge fund positions. Star Gas Partners, L.P. (NYSE:SGU) 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 SGU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SGU investors were disappointed as the stock returned 0.5% 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.
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