We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Holly Energy Partners, L.P. (NYSE:HEP).
Holly Energy Partners, L.P. (NYSE:HEP) has experienced an increase in activity from the world’s largest hedge funds lately. HEP was in 6 hedge funds’ portfolios at the end of September. There were 1 hedge funds in our database with HEP positions at the end of the previous quarter. Our calculations also showed that HEP 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.
According to most traders, hedge funds are perceived as slow, outdated investment vehicles of years past. While there are greater than 8000 funds trading at present, Our experts choose to focus on the top tier of this club, around 750 funds. These money managers direct the majority of the smart money’s total asset base, and by keeping track of their highest performing picks, Insider Monkey has unearthed several investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Matthew Hulsizer of PEAK6 Capital
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. With all of this in mind we’re going to check out the new hedge fund action regarding Holly Energy Partners, L.P. (NYSE:HEP).
How are hedge funds trading Holly Energy Partners, L.P. (NYSE:HEP)?
Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 500% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HEP over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of Holly Energy Partners, L.P. (NYSE:HEP), with a stake worth $7.9 million reported as of the end of September. Trailing Citadel Investment Group was Marshall Wace, which amassed a stake valued at $5 million. PEAK6 Capital Management, Renaissance Technologies, and JS Capital 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 BP Capital allocated the biggest weight to Holly Energy Partners, L.P. (NYSE:HEP), around 0.09% of its 13F portfolio. Marshall Wace is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to HEP.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Marshall Wace, managed by Paul Marshall and Ian Wace, assembled the most valuable position in Holly Energy Partners, L.P. (NYSE:HEP). Marshall Wace had $5 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $1 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Jonathan Soros’s JS Capital, and BP Capital.
Let’s check out hedge fund activity in other stocks similar to Holly Energy Partners, L.P. (NYSE:HEP). We will take a look at Baozun Inc (NASDAQ:BZUN), Sotheby’s (NYSE:BID), Nevro Corp (NYSE:NVRO), and Boyd Gaming Corporation (NYSE:BYD). This group of stocks’ market valuations are similar to HEP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BZUN | 16 | 58309 | 3 |
| BID | 18 | 702089 | -2 |
| NVRO | 21 | 632361 | -7 |
| BYD | 25 | 214519 | -5 |
| Average | 20 | 401820 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $402 million. That figure was $15 million in HEP’s case. Boyd Gaming Corporation (NYSE:BYD) is the most popular stock in this table. On the other hand Baozun Inc (NASDAQ:BZUN) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Holly Energy Partners, L.P. (NYSE:HEP) is even less popular than BZUN. Hedge funds dodged a bullet by taking a bearish stance towards HEP. 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 HEP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HEP investors were disappointed as the stock returned -8.9% 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.
