We can judge whether Golar LNG Partners LP (NASDAQ:GMLP) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Golar LNG Partners LP (NASDAQ:GMLP) a good investment now? Investors who are in the know are becoming more confident. The number of bullish hedge fund bets increased by 2 in recent months. Our calculations also showed that GMLP isn't among the 30 most popular stocks among hedge funds. GMLP was in 6 hedge funds' portfolios at the end of the third quarter of 2018. There were 4 hedge funds in our database with GMLP positions at the end of the previous quarter.
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 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 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.
Let's take a glance at the latest hedge fund action encompassing Golar LNG Partners LP (NASDAQ:GMLP).
What have hedge funds been doing with Golar LNG Partners LP (NASDAQ:GMLP)?
Heading into the fourth quarter of 2018, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GMLP over the last 13 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
More specifically, Huber Capital Management was the largest shareholder of Golar LNG Partners LP (NASDAQ:GMLP), with a stake worth $28.7 million reported as of the end of September. Trailing Huber Capital Management was Renaissance Technologies, which amassed a stake valued at $2.9 million. Millennium Management, DSAM Partners, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key hedge funds have been driving this bullishness. Millennium Management, managed by Israel Englander, created the biggest position in Golar LNG Partners LP (NASDAQ:GMLP). Millennium Management had $2.5 million invested in the company at the end of the quarter. Guy Shahar's DSAM Partners also made a $2.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer's PEAK6 Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Golar LNG Partners LP (NASDAQ:GMLP) but similarly valued. These stocks are HealthStream, Inc. (NASDAQ:HSTM), NCI Building Systems, Inc. (NYSE:NCS), Triumph Bancorp Inc (NASDAQ:TBK), and Apellis Pharmaceuticals, Inc. (NASDAQ:APLS). This group of stocks' market values are similar to GMLP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HSTM,11,47381,-4 NCS,28,151081,10 TBK,7,103874,-6 APLS,14,255091,2 Average,15,139357,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $37 million in GMLP's case. NCI Building Systems, Inc. (NYSE:NCS) is the most popular stock in this table. On the other hand Triumph Bancorp Inc (NASDAQ:TBK) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Golar LNG Partners LP (NASDAQ:GMLP) is even less popular than TBK. 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.