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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Sunoco LP (NYSE:SUN) to find out whether there were any major changes in hedge funds' views.
Is Sunoco (SUN) a good stock to buy now? Sunoco shareholders have witnessed an increase in hedge fund sentiment recently. Sunoco LP (NYSE:SUN) was in 6 hedge funds' portfolios at the end of September. The all time high for this statistics is 12. Our calculations also showed that SUN 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.
Today there are several indicators investors use to appraise their stock investments. Two of the most innovative indicators are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outpace the market by a solid amount (see the details here).
Paul Marshall of Marshall Wace
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 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we're going to take a look at the fresh hedge fund action surrounding Sunoco LP (NYSE:SUN).
What have hedge funds been doing with Sunoco LP (NYSE:SUN)?
At Q3's end, 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 SUN over the last 21 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Arrowstreet Capital held the most valuable stake in Sunoco LP (NYSE:SUN), which was worth $6.8 million at the end of the third quarter. On the second spot was MSDC Management which amassed $5 million worth of shares. Citadel Investment Group, PEAK6 Capital Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position MSDC Management allocated the biggest weight to Sunoco LP (NYSE:SUN), around 1.04% of its 13F portfolio. Becker Drapkin Management is also relatively very bullish on the stock, designating 0.19 percent of its 13F equity portfolio to SUN.
As one would reasonably expect, key hedge funds were breaking ground themselves. MSDC Management, managed by Marc Lisker, Glenn Fuhrman and John Phelan, assembled the most outsized position in Sunoco LP (NYSE:SUN). MSDC Management had $5 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $0.8 million investment in the stock during the quarter.
Let's also examine hedge fund activity in other stocks similar to Sunoco LP (NYSE:SUN). We will take a look at BankUnited Inc (NYSE:BKU), Bank of Hawaii Corporation (NYSE:BOH), Ryman Hospitality Properties, Inc. (NYSE:RHP), American Equity Investment Life Holding Company (NYSE:AEL), PacWest Bancorp (NASDAQ:PACW), Axonics Modulation Technologies, Inc. (NASDAQ:AXNX), and Compass Minerals International, Inc. (NYSE:CMP). All of these stocks' market caps are similar to SUN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BKU,14,103775,-2 BOH,21,69967,3 RHP,24,405247,-1 AEL,12,37048,0 PACW,28,247992,4 AXNX,28,371489,2 CMP,14,67272,-4 Average,20.1,186113,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $15 million in SUN's case. PacWest Bancorp (NASDAQ:PACW) is the most popular stock in this table. On the other hand American Equity Investment Life Holding Company (NYSE:AEL) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Sunoco LP (NYSE:SUN) is even less popular than AEL. Our overall hedge fund sentiment score for SUN is 22. 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. Hedge funds clearly dropped the ball on SUN as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 SUN as the stock returned 21.9% since Q3 (through November 27th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.