We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Usa Compression Partners LP (NYSE:USAC) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Usa Compression Partners LP (NYSE:USAC) investors should be aware of an increase in enthusiasm from smart money lately. Our calculations also showed that USAC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely 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, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the latest hedge fund action surrounding Usa Compression Partners LP (NYSE:USAC).
What does smart money think about Usa Compression Partners LP (NYSE:USAC)?
At Q4’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in USAC over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Arrowstreet Capital was the largest shareholder of Usa Compression Partners LP (NYSE:USAC), with a stake worth $11.6 million reported as of the end of September. Trailing Arrowstreet Capital was Marshall Wace LLP, which amassed a stake valued at $3.1 million. Intrinsic Edge Capital, Citadel Investment Group, and Citadel Investment Group 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 Lucas Capital Management allocated the biggest weight to Usa Compression Partners LP (NYSE:USAC), around 0.55% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, setting aside 0.32 percent of its 13F equity portfolio to USAC.
As industrywide interest jumped, key money managers have jumped into Usa Compression Partners LP (NYSE:USAC) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the biggest position in Usa Compression Partners LP (NYSE:USAC). Marshall Wace LLP had $3.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.6 million position during the quarter. The other funds with new positions in the stock are Richard Driehaus’s Driehaus Capital and Renaissance Technologies.
Let’s check out hedge fund activity in other stocks similar to Usa Compression Partners LP (NYSE:USAC). These stocks are Hub Group Inc (NASDAQ:HUBG), Matson, Inc. (NYSE:MATX), IAMGOLD Corporation (NYSE:IAG), and Fitbit Inc (NYSE:FIT). This group of stocks’ market caps are closest to USAC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HUBG | 19 | 285556 | -4 |
| MATX | 10 | 5900 | 0 |
| IAG | 17 | 164270 | 3 |
| FIT | 24 | 208950 | 15 |
| Average | 17.5 | 166169 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $19 million in USAC’s case. Fitbit Inc (NYSE:FIT) is the most popular stock in this table. On the other hand Matson, Inc. (NYSE:MATX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Usa Compression Partners LP (NYSE:USAC) is even less popular than MATX. Hedge funds dodged a bullet by taking a bearish stance towards USAC. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately USAC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); USAC investors were disappointed as the stock returned -69.9% during the same time period 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 most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
