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In this article you are going to find out whether hedge funds think Kimbell Royalty Partners, LP (NYSE:KRP) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Kimbell Royalty Partners, LP (NYSE:KRP) a buy right now? Money managers were betting on the stock. The number of bullish hedge fund positions inched up by 1 lately. Kimbell Royalty Partners, LP (NYSE:KRP) was in 6 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 9. Our calculations also showed that KRP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 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.
Matthew Hulsizer of PEAK6 Capital
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 $24 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. With all of this in mind let's take a look at the recent hedge fund action encompassing Kimbell Royalty Partners, LP (NYSE:KRP).
Do Hedge Funds Think KRP Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in KRP over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Nokomis Capital held the most valuable stake in Kimbell Royalty Partners, LP (NYSE:KRP), which was worth $4 million at the end of the fourth quarter. On the second spot was Mill Road Capital Management which amassed $3.9 million worth of shares. Renaissance Technologies, Citadel Investment Group, and Horizon Asset Management 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 Nokomis Capital allocated the biggest weight to Kimbell Royalty Partners, LP (NYSE:KRP), around 1.73% of its 13F portfolio. Mill Road Capital Management is also relatively very bullish on the stock, earmarking 1.29 percent of its 13F equity portfolio to KRP.
As aggregate interest increased, some big names were leading the bulls' herd. Mill Road Capital Management, managed by Thomas E. Lynch, assembled the biggest position in Kimbell Royalty Partners, LP (NYSE:KRP). Mill Road Capital Management had $3.9 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $0.9 million investment in the stock during the quarter. The other funds with brand new KRP positions are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Matthew Hulsizer's PEAK6 Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Kimbell Royalty Partners, LP (NYSE:KRP) but similarly valued. These stocks are Retail Value Inc. (NYSE:RVI), NI Holdings, Inc. (NASDAQ:NODK), BioDelivery Sciences International, Inc. (NASDAQ:BDSI), Trinity Capital Inc. (NASDAQ:TRIN), Rocky Brands, Inc. (NASDAQ:RCKY), MVB Financial Corp. (NASDAQ:MVBF), and Puma Biotechnology Inc (NASDAQ:PBYI). This group of stocks' market valuations resemble KRP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RVI,11,87341,-7 NODK,7,28474,1 BDSI,15,63980,-4 TRIN,12,24191,12 RCKY,11,27959,0 MVBF,7,41803,2 PBYI,16,125765,1 Average,11.3,57073,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.3 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $11 million in KRP's case. Puma Biotechnology Inc (NASDAQ:PBYI) is the most popular stock in this table. On the other hand NI Holdings, Inc. (NASDAQ:NODK) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Kimbell Royalty Partners, LP (NYSE:KRP) is even less popular than NODK. Our overall hedge fund sentiment score for KRP is 26. 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 KRP 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. A small number of hedge funds were also right about betting on KRP as the stock returned 32.3% since Q1 (through June 25th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.