It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 24.4% during the first 9 months of 2019 and outperformed the S&P 500 ETF by 4 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards BP Midstream Partners LP (NYSE:BPMP) changed during the first quarter.
Is BP Midstream Partners LP (NYSE:BPMP) an excellent stock to buy now? Hedge funds are taking a pessimistic view. The number of long hedge fund positions were cut by 1 recently. Our calculations also showed that BPMP isn't among the 30 most popular stocks among hedge funds (see the video below). BPMP was in 5 hedge funds' portfolios at the end of the second quarter of 2019. There were 6 hedge funds in our database with BPMP holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, 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. We're going to take a gander at the fresh hedge fund action surrounding BP Midstream Partners LP (NYSE:BPMP).
How have hedgies been trading BP Midstream Partners LP (NYSE:BPMP)?
At the end of the second quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BPMP over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Permian Investment Partners was the largest shareholder of BP Midstream Partners LP (NYSE:BPMP), with a stake worth $22.7 million reported as of the end of March. Trailing Permian Investment Partners was Marshall Wace LLP, which amassed a stake valued at $3.8 million. Arrowstreet Capital, Renaissance Technologies, and Vertex One Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since BP Midstream Partners LP (NYSE:BPMP) has faced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there exists a select few money managers that decided to sell off their entire stakes by the end of the second quarter. It's worth mentioning that T Boone Pickens's BP Capital dropped the biggest stake of the 750 funds monitored by Insider Monkey, valued at about $1.2 million in stock, and Matthew Hulsizer's PEAK6 Capital Management was right behind this move, as the fund dumped about $0 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as BP Midstream Partners LP (NYSE:BPMP) but similarly valued. We will take a look at Redwood Trust, Inc. (NYSE:RWT), IAMGOLD Corporation (NYSE:IAG), Visteon Corp (NASDAQ:VC), and Southwestern Energy Company (NYSE:SWN). This group of stocks' market caps resemble BPMP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RWT,13,97744,-2 IAG,15,150001,2 VC,17,281647,-4 SWN,18,256829,-6 Average,15.75,196555,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $197 million. That figure was $32 million in BPMP's case. Southwestern Energy Company (NYSE:SWN) is the most popular stock in this table. On the other hand Redwood Trust, Inc. (NYSE:RWT) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks BP Midstream Partners LP (NYSE:BPMP) is even less popular than RWT. Hedge funds dodged a bullet by taking a bearish stance towards BPMP. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BPMP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BPMP investors were disappointed as the stock returned -3.8% 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 among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.