At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not DCP Midstream LP (NYSE:DCP) makes for a good investment right now.
Is DCP Midstream LP (NYSE:DCP) a superb investment right now? Hedge funds were becoming hopeful. The number of long hedge fund positions inched up by 1 lately. DCP Midstream LP (NYSE:DCP) was in 3 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 6. Our calculations also showed that DCP 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.
In the 21st century investor’s toolkit there are a large number of signals stock market investors employ to evaluate stocks. A duo of the most underrated signals are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can beat the market by a solid amount (see the details here).
Matthew Hulsizer of PEAK6 Capital
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. 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. Keeping this in mind let's view the recent hedge fund action surrounding DCP Midstream LP (NYSE:DCP).
Hedge fund activity in DCP Midstream LP (NYSE:DCP)
Heading into the fourth quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in DCP over the last 21 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in DCP Midstream LP (NYSE:DCP), which was worth $4.8 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $1.5 million worth of shares. Heronetta Management was 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 Heronetta Management allocated the biggest weight to DCP Midstream LP (NYSE:DCP), around 0.68% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to DCP.
As one would reasonably expect, key hedge funds have jumped into DCP Midstream LP (NYSE:DCP) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, established the biggest position in DCP Midstream LP (NYSE:DCP). PEAK6 Capital Management had $0 million invested in the company at the end of the quarter.
Let's go over hedge fund activity in other stocks similar to DCP Midstream LP (NYSE:DCP). We will take a look at Patterson Companies, Inc. (NASDAQ:PDCO), ViaSat, Inc. (NASDAQ:VSAT), Cushman & Wakefield plc (NYSE:CWK), Avista Corp (NYSE:AVA), Fabrinet (NYSE:FN), Trinity Industries, Inc. (NYSE:TRN), and Nelnet, Inc. (NYSE:NNI). This group of stocks' market caps resemble DCP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PDCO,18,82656,-4 VSAT,30,907647,7 CWK,12,87064,-5 AVA,20,74564,-1 FN,17,74880,-6 TRN,23,766000,-2 NNI,13,133382,1 Average,19,303742,-1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $304 million. That figure was $6 million in DCP's case. ViaSat, Inc. (NASDAQ:VSAT) is the most popular stock in this table. On the other hand Cushman & Wakefield plc (NYSE:CWK) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks DCP Midstream LP (NYSE:DCP) is even less popular than CWK. Our overall hedge fund sentiment score for DCP is 21. 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 DCP 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on DCP as the stock returned 48.3% since Q3 (through November 23rd) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.