Hedge Funds Souring On Plains GP Holdings LP (PAGP)

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. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Plains GP Holdings LP (NYSE:PAGP).

Plains GP Holdings LP (NYSE:PAGP) was in 22 hedge funds’ portfolios at the end of the first quarter of 2020. PAGP investors should pay attention to a decrease in hedge fund sentiment lately. There were 26 hedge funds in our database with PAGP positions at the end of the previous quarter. Our calculations also showed that PAGP 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).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the recent hedge fund action encompassing Plains GP Holdings LP (NYSE:PAGP).

What have hedge funds been doing with Plains GP Holdings LP (NYSE:PAGP)?

Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PAGP over the last 18 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

More specifically, D E Shaw was the largest shareholder of Plains GP Holdings LP (NYSE:PAGP), with a stake worth $17.9 million reported as of the end of September. Trailing D E Shaw was Deep Basin Capital, which amassed a stake valued at $12.8 million. Millennium Management, Citadel Investment Group, and Marshall Wace LLP 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 Deep Basin Capital allocated the biggest weight to Plains GP Holdings LP (NYSE:PAGP), around 3.24% of its 13F portfolio. Yaupon Capital is also relatively very bullish on the stock, designating 1.81 percent of its 13F equity portfolio to PAGP.

Since Plains GP Holdings LP (NYSE:PAGP) has witnessed falling interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of money managers that slashed their entire stakes heading into Q4. At the top of the heap, Anand Parekh’s Alyeska Investment Group dropped the largest stake of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $32.5 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dumped its stock, about $16.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 4 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Plains GP Holdings LP (NYSE:PAGP). These stocks are Magnolia Oil & Gas Corporation (NASDAQ:MGY), Independent Bank Group Inc (NASDAQ:IBTX), DiamondRock Hospitality Company (NYSE:DRH), and Terex Corporation (NYSE:TEX). This group of stocks’ market valuations are similar to PAGP’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $88 million in PAGP’s case. Terex Corporation (NYSE:TEX) is the most popular stock in this table. On the other hand DiamondRock Hospitality Company (NYSE:DRH) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Plains GP Holdings LP (NYSE:PAGP) is more popular among hedge funds. 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on PAGP as the stock returned 109.2% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.