Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Kimbell Royalty Partners, LP (NYSE:KRP).
Is Kimbell Royalty Partners, LP (NYSE:KRP) a good investment today? Investors who are in the know are taking a bullish view. The number of bullish hedge fund positions moved up by 3 lately. Our calculations also showed that KRP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). KRP was in 9 hedge funds’ portfolios at the end of the first quarter of 2020. There were 6 hedge funds in our database with KRP positions at the end of the previous quarter.
Video: 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
Clint Carlson of Carlson Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s analyze the new hedge fund action encompassing Kimbell Royalty Partners, LP (NYSE:KRP).
How have hedgies been trading Kimbell Royalty Partners, LP (NYSE:KRP)?
At the end of the first quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in KRP over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Kimbell Royalty Partners, LP (NYSE:KRP) was held by Alyeska Investment Group, which reported holding $4 million worth of stock at the end of September. It was followed by Nokomis Capital with a $2 million position. Other investors bullish on the company included Horizon Asset Management, Soros Fund Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Nokomis Capital allocated the biggest weight to Kimbell Royalty Partners, LP (NYSE:KRP), around 0.95% of its 13F portfolio. Alyeska Investment Group is also relatively very bullish on the stock, designating 0.08 percent of its 13F equity portfolio to KRP.
As one would reasonably expect, key money managers have jumped into Kimbell Royalty Partners, LP (NYSE:KRP) headfirst. Alyeska Investment Group, managed by Anand Parekh, assembled the biggest position in Kimbell Royalty Partners, LP (NYSE:KRP). Alyeska Investment Group had $4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Clint Carlson’s Carlson Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Kimbell Royalty Partners, LP (NYSE:KRP) but similarly valued. These stocks are Wanda Sports Group Company Limited (NASDAQ:WSG), Noble Midstream Partners LP (NASDAQ:NBLX), Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA), and DSP Group, Inc. (NASDAQ:DSPG). This group of stocks’ market caps are closest to KRP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WSG | 6 | 5944 | 3 |
| NBLX | 2 | 1267 | -3 |
| KNSA | 10 | 148521 | 1 |
| DSPG | 14 | 53755 | 0 |
| Average | 8 | 52372 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $11 million in KRP’s case. DSP Group, Inc. (NASDAQ:DSPG) is the most popular stock in this table. On the other hand Noble Midstream Partners LP (NASDAQ:NBLX) is the least popular one with only 2 bullish hedge fund positions. Kimbell Royalty Partners, LP (NYSE:KRP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on KRP as the stock returned 48.6% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
