The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2019. In this article we are going to take a look at smart money sentiment towards Calumet Specialty Products Partners, L.P (NASDAQ:CLMT).
Calumet Specialty Products Partners, L.P (NASDAQ:CLMT) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of the third quarter of 2019. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Timkensteel Corporation (NYSE:TMST), Sorrentto Therapeutics Inc (NASDAQ:SRNE), and Seres Therapeutics Inc (NASDAQ:MCRB) to gather more data points. Our calculations also showed that CLMT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ken Fisher of Fisher Asset Management
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. Keeping this in mind let’s take a glance at the fresh hedge fund action regarding Calumet Specialty Products Partners, L.P (NASDAQ:CLMT).
How have hedgies been trading Calumet Specialty Products Partners, L.P (NASDAQ:CLMT)?
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. By comparison, 4 hedge funds held shares or bullish call options in CLMT a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Among these funds, Dorset Management held the most valuable stake in Calumet Specialty Products Partners, L.P (NASDAQ:CLMT), which was worth $7.4 million at the end of the third quarter. On the second spot was Springhouse Capital Management which amassed $1.1 million worth of shares. Fisher Asset Management, Citadel Investment Group, and Marshall Wace 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 Dorset Management allocated the biggest weight to Calumet Specialty Products Partners, L.P (NASDAQ:CLMT), around 3.09% of its 13F portfolio. Springhouse Capital Management is also relatively very bullish on the stock, setting aside 0.71 percent of its 13F equity portfolio to CLMT.
Due to the fact that Calumet Specialty Products Partners, L.P (NASDAQ:CLMT) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedge funds that slashed their entire stakes heading into Q4. It’s worth mentioning that Renaissance Technologies dropped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, worth about $0.2 million in stock, and Jonathan Soros’s JS Capital was right behind this move, as the fund sold off about $0.1 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Calumet Specialty Products Partners, L.P (NASDAQ:CLMT) but similarly valued. These stocks are Timkensteel Corporation (NYSE:TMST), Sorrentto Therapeutics Inc (NASDAQ:SRNE), Seres Therapeutics Inc (NASDAQ:MCRB), and MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT). All of these stocks’ market caps are similar to CLMT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TMST | 14 | 38476 | -2 |
| SRNE | 3 | 876 | -2 |
| MCRB | 6 | 6889 | -1 |
| MCFT | 17 | 75512 | 0 |
| Average | 10 | 30438 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $9 million in CLMT’s case. MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) is the most popular stock in this table. On the other hand Sorrentto Therapeutics Inc (NASDAQ:SRNE) is the least popular one with only 3 bullish hedge fund positions. Calumet Specialty Products Partners, L.P (NASDAQ:CLMT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CLMT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CLMT investors were disappointed as the stock returned -15.1% during the first two months of the fourth quarter 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 in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
