We can judge whether SemGroup Corporation (NYSE:SEMG) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is SemGroup Corporation (NYSE:SEMG) a superb stock to buy now? The best stock pickers are buying. The number of long hedge fund bets inched up by 2 in recent months. Our calculations also showed that SEMG isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the fresh hedge fund action encompassing SemGroup Corporation (NYSE:SEMG).
How are hedge funds trading SemGroup Corporation (NYSE:SEMG)?
At the end of the second quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in SEMG 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin’s Citadel Investment Group has the biggest position in SemGroup Corporation (NYSE:SEMG), worth close to $16.2 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Point72 Asset Management, led by Steve Cohen, holding a $15.2 million position; 0.1% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions consist of Renaissance Technologies, Stuart J. Zimmer’s Zimmer Partners and Paul Reeder and Edward Shapiro’s PAR Capital Management.
Now, key hedge funds were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, initiated the biggest position in SemGroup Corporation (NYSE:SEMG). Point72 Asset Management had $15.2 million invested in the company at the end of the quarter. Stuart J. Zimmer’s Zimmer Partners also made a $7.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Jonathan Soros’s JS Capital, and Thiru Ramakrishnan’s TVR Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as SemGroup Corporation (NYSE:SEMG) but similarly valued. We will take a look at National Western Life Group, Inc.(NASDAQ:NWLI), The Greenbrier Companies, Inc. (NYSE:GBX), Pacific Biosciences of California, Inc. (NASDAQ:PACB), and Gannett Co., Inc. (NYSE:GCI). All of these stocks’ market caps are similar to SEMG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NWLI | 8 | 17676 | -1 |
| GBX | 14 | 19968 | 3 |
| PACB | 22 | 155804 | 3 |
| GCI | 14 | 121005 | -2 |
| Average | 14.5 | 78613 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $65 million in SEMG’s case. Pacific Biosciences of California, Inc. (NASDAQ:PACB) is the most popular stock in this table. On the other hand National Western Life Group, Inc. (NASDAQ:NWLI) is the least popular one with only 8 bullish hedge fund positions. SemGroup Corporation (NYSE:SEMG) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on SEMG as the stock returned 43% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
