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We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Sunoco LP (NYSE:SUN).
Sunoco LP (NYSE:SUN) investors should pay attention to an increase in enthusiasm from smart money in recent months. Our calculations also showed that SUN isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Today there are dozens of signals investors put to use to analyze publicly traded companies. A couple of the most useful signals are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best money managers can outclass the market by a solid amount (see the details here).
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James Dondero of Highland Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind let's take a peek at the latest hedge fund action encompassing Sunoco LP (NYSE:SUN).
How are hedge funds trading Sunoco LP (NYSE:SUN)?
At Q4's end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in SUN a year ago. 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, Marshall Wace LLP held the most valuable stake in Sunoco LP (NYSE:SUN), which was worth $5.4 million at the end of the third quarter. On the second spot was Intrinsic Edge Capital which amassed $5.2 million worth of shares. Driehaus Capital, Citadel Investment Group, and Highland Capital 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 Intrinsic Edge Capital allocated the biggest weight to Sunoco LP (NYSE:SUN), around 0.65% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, designating 0.05 percent of its 13F equity portfolio to SUN.
As industrywide interest jumped, some big names have jumped into Sunoco LP (NYSE:SUN) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most outsized position in Sunoco LP (NYSE:SUN). Marshall Wace LLP had $5.4 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $0.5 million position during the quarter. The only other fund with a brand new SUN position is Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.
Let's now take a look at hedge fund activity in other stocks similar to Sunoco LP (NYSE:SUN). We will take a look at Frontline Ltd (NYSE:FRO), First Financial Bancorp (NASDAQ:FFBC), Innospec Inc. (NASDAQ:IOSP), and Werner Enterprises, Inc. (NASDAQ:WERN). This group of stocks' market caps match SUN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FRO,17,115018,3 FFBC,5,6404,-2 IOSP,18,114008,-2 WERN,21,140926,1 Average,15.25,94089,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $14 million in SUN's case. Werner Enterprises, Inc. (NASDAQ:WERN) is the most popular stock in this table. On the other hand First Financial Bancorp (NASDAQ:FFBC) is the least popular one with only 5 bullish hedge fund positions. Sunoco LP (NYSE:SUN) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately SUN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SUN investors were disappointed as the stock returned -46.1% during the same time period 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 most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.