Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Western Midstream Partners, LP (NYSE:WES) in this article.
Is Western Midstream Partners, LP (NYSE:WES) an excellent investment now? The smart money is taking an optimistic view. The number of long hedge fund bets advanced by 1 in recent months. Our calculations also showed that WES isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
[caption id="attachment_758454" align="aligncenter" width="450"] James Dondero of Highland Capital Management[/caption]
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's go over the fresh hedge fund action encompassing Western Midstream Partners, LP (NYSE:WES).
How have hedgies been trading Western Midstream Partners, LP (NYSE:WES)?
Heading into the third quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WES over the last 16 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Zimmer Partners, managed by Stuart J. Zimmer, holds the largest position in Western Midstream Partners, LP (NYSE:WES). Zimmer Partners has a $109.3 million position in the stock, comprising 1.2% of its 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $13.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers with similar optimism comprise James Dondero's Highland Capital Management, Perella Weinberg Partners and Simon Davies's Sand Grove Capital Partners.
Now, specific money managers have jumped into Western Midstream Partners, LP (NYSE:WES) headfirst. Perella Weinberg Partners established the largest position in Western Midstream Partners, LP (NYSE:WES). Perella Weinberg Partners had $9.1 million invested in the company at the end of the quarter. Simon Davies's Sand Grove Capital Partners also made a $8.5 million investment in the stock during the quarter. The other funds with brand new WES positions are Michael Hintze's CQS Cayman LP, Simon Davies's Sand Grove Capital Partners, and Matthew Hulsizer's PEAK6 Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to Western Midstream Partners, LP (NYSE:WES). These stocks are Quest Diagnostics Incorporated (NYSE:DGX), Canopy Growth Corporation (NYSE:CGC), W.P. Carey Inc. (NYSE:WPC), and TransUnion (NYSE:TRU). This group of stocks' market values match WES's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DGX,24,350395,2 CGC,4,23397,-2 WPC,16,41714,3 TRU,30,1002765,1 Average,18.5,354568,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $355 million. That figure was $159 million in WES's case. TransUnion (NYSE:TRU) is the most popular stock in this table. On the other hand Canopy Growth Corporation (NYSE:CGC) is the least popular one with only 4 bullish hedge fund positions. Western Midstream Partners, LP (NYSE:WES) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately WES wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WES investors were disappointed as the stock returned -17.4% during the third 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 (see the video below) among hedge funds as many of these stocks already outperformed the market so far in 2019. 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.