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Is Phillips 66 Partners LP (NYSE:PSXP) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Phillips 66 Partners LP (NYSE:PSXP) was in 4 hedge funds' portfolios at the end of September. The all time high for this statistics is 8. PSXP has experienced a decrease in hedge fund sentiment recently. There were 6 hedge funds in our database with PSXP positions at the end of the second quarter. Our calculations also showed that PSXP isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Stuart Zimmer of Zimmer Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let's review the latest hedge fund action surrounding Phillips 66 Partners LP (NYSE:PSXP).
How are hedge funds trading Phillips 66 Partners LP (NYSE:PSXP)?
At third quarter's end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the previous quarter. On the other hand, there were a total of 5 hedge funds with a bullish position in PSXP a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Zimmer Partners, managed by Stuart J. Zimmer, holds the number one position in Phillips 66 Partners LP (NYSE:PSXP). Zimmer Partners has a $7.8 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $4.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish consist of Henry Breck's Heronetta Management, and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Heronetta Management allocated the biggest weight to Phillips 66 Partners LP (NYSE:PSXP), around 0.81% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, earmarking 0.12 percent of its 13F equity portfolio to PSXP.
Due to the fact that Phillips 66 Partners LP (NYSE:PSXP) has experienced declining sentiment from the smart money, logic holds that there exists a select few hedge funds who sold off their positions entirely in the third quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP sold off the largest stake of the "upper crust" of funds tracked by Insider Monkey, comprising about $1.4 million in stock. Phil Frohlich's fund, Prescott Group Capital Management, also dumped its stock, about $0.8 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds in the third quarter.
Let's also examine hedge fund activity in other stocks similar to Phillips 66 Partners LP (NYSE:PSXP). We will take a look at Thor Industries, Inc. (NYSE:THO), Aegon N.V. (NYSE:AEG), Allogene Therapeutics, Inc. (NASDAQ:ALLO), Hyatt Hotels Corporation (NYSE:H), Invesco Ltd. (NYSE:IVZ), First Horizon National Corporation (NYSE:FHN), and Axalta Coating Systems Ltd (NYSE:AXTA). This group of stocks' market caps resemble PSXP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position THO,39,274230,0 AEG,3,11800,-1 ALLO,21,248617,-3 H,26,574829,-1 IVZ,21,600095,-1 FHN,30,378810,-5 AXTA,45,1220833,-2 Average,26.4,472745,-1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $473 million. That figure was $13 million in PSXP's case. Axalta Coating Systems Ltd (NYSE:AXTA) is the most popular stock in this table. On the other hand Aegon N.V. (NYSE:AEG) is the least popular one with only 3 bullish hedge fund positions. Phillips 66 Partners LP (NYSE:PSXP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PSXP is 19.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on PSXP as the stock returned 25.3% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.