In this article we will check out the progression of hedge fund sentiment towards Black Stone Minerals LP (NYSE:BSM) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Black Stone Minerals LP (NYSE:BSM) was in 3 hedge funds' portfolios at the end of the first quarter of 2020. BSM investors should pay attention to a decrease in enthusiasm from smart money of late. There were 4 hedge funds in our database with BSM holdings at the end of the previous quarter. Our calculations also showed that BSM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are numerous metrics stock traders have at their disposal to grade their stock investments. A pair of the most useful metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best hedge fund managers can outclass the market by a healthy amount (see the details here).
[caption id="attachment_746830" align="aligncenter" width="399"] Matthew Hulsizer of PEAK6 Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital's Michael Castor expects to double. 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 we're going to check out the recent hedge fund action surrounding Black Stone Minerals LP (NYSE:BSM).
How have hedgies been trading Black Stone Minerals LP (NYSE:BSM)?
Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BSM over the last 18 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.
More specifically, Yost Capital Management was the largest shareholder of Black Stone Minerals LP (NYSE:BSM), with a stake worth $1.2 million reported as of the end of September. Trailing Yost Capital Management was Horizon Asset Management, which amassed a stake valued at $0.9 million. PEAK6 Capital Management 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 Yost Capital Management allocated the biggest weight to Black Stone Minerals LP (NYSE:BSM), around 1.14% of its 13F portfolio. Horizon Asset Management is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to BSM.
Because Black Stone Minerals LP (NYSE:BSM) has witnessed bearish sentiment from the smart money, it's easy to see that there is a sect of hedge funds who sold off their positions entirely by the end of the third quarter. Intriguingly, Ken Griffin's Citadel Investment Group sold off the biggest position of all the hedgies monitored by Insider Monkey, totaling an estimated $0.7 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund cut about $0.1 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Black Stone Minerals LP (NYSE:BSM) but similarly valued. These stocks are Callaway Golf Company (NYSE:ELY), OceanFirst Financial Corp. (NASDAQ:OCFC), WESCO International, Inc. (NYSE:WCC), and US Ecology Inc. (NASDAQ:ECOL). All of these stocks' market caps resemble BSM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ELY,23,120223,3 OCFC,9,28760,-6 WCC,32,221143,6 ECOL,22,40929,8 Average,21.5,102764,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $2 million in BSM's case. WESCO International, Inc. (NYSE:WCC) is the most popular stock in this table. On the other hand OceanFirst Financial Corp. (NASDAQ:OCFC) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Black Stone Minerals LP (NYSE:BSM) is even less popular than OCFC. Hedge funds clearly dropped the ball on BSM as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on BSM as the stock returned 43.6% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.