Is Golar LNG Partners LP (NASDAQ:GMLP) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Golar LNG Partners LP (NASDAQ:GMLP) investors should be aware of a decrease in enthusiasm from smart money lately. Our calculations also showed that GMLP 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.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_339352" align="alignnone" width="2480"] Joe Huber of Huber Capital Management[/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 we're going to analyze the recent hedge fund action encompassing Golar LNG Partners LP (NASDAQ:GMLP).
How are hedge funds trading Golar LNG Partners LP (NASDAQ:GMLP)?
At Q3's end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GMLP over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Huber Capital Management, managed by Joe Huber, holds the biggest position in Golar LNG Partners LP (NASDAQ:GMLP). Huber Capital Management has a $32.5 million position in the stock, comprising 4% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $2.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism comprise Ken Griffin's Citadel Investment Group, Matthew Hulsizer's PEAK6 Capital Management and . In terms of the portfolio weights assigned to each position Huber Capital Management allocated the biggest weight to Golar LNG Partners LP (NASDAQ:GMLP), around 4.02% of its 13F portfolio. PEAK6 Capital Management is also relatively very bullish on the stock, earmarking 0.0042 percent of its 13F equity portfolio to GMLP.
Judging by the fact that Golar LNG Partners LP (NASDAQ:GMLP) has witnessed declining sentiment from the smart money, it's easy to see that there were a few funds that elected to cut their full holdings heading into Q4. Intriguingly, Israel Englander's Millennium Management said goodbye to the biggest investment of the "upper crust" of funds followed by Insider Monkey, valued at an estimated $1 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund cut about $0.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Golar LNG Partners LP (NASDAQ:GMLP) but similarly valued. We will take a look at Allegiance Bancshares, Inc. (NASDAQ:ABTX), LeMaitre Vascular Inc (NASDAQ:LMAT), Principia Biopharma Inc. (NASDAQ:PRNB), and Genfit SA (NASDAQ:GNFT). This group of stocks' market valuations resemble GMLP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABTX,8,18893,2 LMAT,10,12279,-1 PRNB,12,196940,0 GNFT,4,19777,-2 Average,8.5,61972,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $36 million in GMLP's case. Principia Biopharma Inc. (NASDAQ:PRNB) is the most popular stock in this table. On the other hand Genfit SA (NASDAQ:GNFT) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Golar LNG Partners LP (NASDAQ:GMLP) is even less popular than GNFT. Hedge funds dodged a bullet by taking a bearish stance towards GMLP. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately GMLP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GMLP investors were disappointed as the stock returned 3.3% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.