It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in CNX Midstream Partners LP (NYSE:CNXM).
Is CNX Midstream Partners LP (NYSE:CNXM) a buy right now? Prominent investors are taking a bullish view. The number of bullish hedge fund bets rose by 1 lately. Our calculations also showed that CNXM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CNXM was in 6 hedge funds’ portfolios at the end of September. There were 5 hedge funds in our database with CNXM 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a gander at the latest hedge fund action encompassing CNX Midstream Partners LP (NYSE:CNXM).
What have hedge funds been doing with CNX Midstream Partners LP (NYSE:CNXM)?
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in CNXM a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in CNX Midstream Partners LP (NYSE:CNXM). Arrowstreet Capital has a $5.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Marshall Wace, managed by Paul Marshall and Ian Wace, which holds a $2.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism comprise Ken Griffin’s Citadel Investment Group, Emanuel J. Friedman’s EJF Capital. In terms of the portfolio weights assigned to each position BP Capital allocated the biggest weight to CNX Midstream Partners LP (NYSE:CNXM), around 1.66% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, dishing out 0.08 percent of its 13F equity portfolio to CNXM.
Now, key money managers were leading the bulls’ herd. Marshall Wace, managed by Paul Marshall and Ian Wace, created the most valuable position in CNX Midstream Partners LP (NYSE:CNXM). Marshall Wace had $2.4 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $0.3 million position during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CNX Midstream Partners LP (NYSE:CNXM) but similarly valued. These stocks are BrightSphere Investment Group plc (NYSE:BSIG), Corindus Vascular Robotics Inc (NYSE:CVRS), Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB), and Ambac Financial Group, Inc. (NASDAQ:AMBC). This group of stocks’ market values are closest to CNXM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BSIG | 21 | 274795 | 2 |
| CVRS | 21 | 291630 | 12 |
| YMAB | 8 | 60479 | 1 |
| AMBC | 14 | 108465 | 0 |
| Average | 16 | 183842 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $184 million. That figure was $13 million in CNXM’s case. BrightSphere Investment Group plc (NYSE:BSIG) is the most popular stock in this table. On the other hand Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks CNX Midstream Partners LP (NYSE:CNXM) is even less popular than YMAB. Hedge funds dodged a bullet by taking a bearish stance towards CNXM. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CNXM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CNXM investors were disappointed as the stock returned 5.5% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
