Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost a third of its value since the end of July. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2018 yielded an average return of 6.7% year-to-date, vs. a gain of 2.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Black Stone Minerals LP (NYSE:BSM).
Black Stone Minerals LP (NYSE:BSM) has experienced a decrease in enthusiasm from smart money of late. BSM was in 5 hedge funds' portfolios at the end of the third quarter of 2018. There were 7 hedge funds in our database with BSM positions at the end of the previous quarter. Our calculations also showed that BSM 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to analyze the key hedge fund action regarding Black Stone Minerals LP (NYSE:BSM).
What does the smart money think about Black Stone Minerals LP (NYSE:BSM)?
At Q3's end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in BSM at the beginning of this year. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Horizon Asset Management, managed by Murray Stahl, holds the largest position in Black Stone Minerals LP (NYSE:BSM). Horizon Asset Management has a $8.6 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, led by Jim Simons, holding a $5.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism include Carson Yost's Yost Capital Management, J. Carlo Cannell's Cannell Capital and Matthew Hulsizer's PEAK6 Capital Management.
Since Black Stone Minerals LP (NYSE:BSM) has experienced declining sentiment from the smart money, logic holds that there were a few hedgies that slashed their positions entirely in the third quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the biggest investment of the "upper crust" of funds monitored by Insider Monkey, totaling an estimated $1.1 million in stock, and Eric Sprott's Sprott Asset Management was right behind this move, as the fund said goodbye to about $0.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds in the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Black Stone Minerals LP (NYSE:BSM) but similarly valued. We will take a look at Ensco plc (NYSE:ESV), Manchester United PLC (NYSE:MANU), Delek US Holdings, Inc. (NYSE:DK), and Semtech Corporation (NASDAQ:SMTC). This group of stocks' market valuations match BSM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ESV,29,677112,2 MANU,8,95726,0 DK,31,403699,2 SMTC,13,134391,1 Average,20.25,327732,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $328 million. That figure was $19 million in BSM's case. Delek US Holdings, Inc. (NYSE:DK) is the most popular stock in this table. On the other hand Manchester United PLC (NYSE:MANU) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Black Stone Minerals LP (NYSE:BSM) is even less popular than MANU. Considering that hedge funds aren't fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn't behind this stock. This isn't necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.