The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Archrock Partners LP (NASDAQ:APLP) from the perspective of those successful funds.
Archrock Partners LP (NASDAQ:APLP) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of the third quarter of 2016. At the end of this article we will also compare APLP to other stocks including New Mountain Finance Corp. (NYSE:NMFC), Hibbett Sports, Inc. (NASDAQ:HIBB), and NutriSystem Inc. (NASDAQ:NTRI) to get a better sense of its popularity.
Follow Archrock Partners L.p. (NASDAQ:APLP)
Follow Archrock Partners L.p. (NASDAQ:APLP)
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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With all of this in mind, let’s analyze the latest action surrounding Archrock Partners LP (NASDAQ:APLP).
Hedge fund activity in Archrock Partners LP (NASDAQ:APLP)
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 3 hedge funds held shares or bullish call options in APLP heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Magnetar Capital, led by Alec Litowitz and Ross Laser, holds the number one position in Archrock Partners LP (NASDAQ:APLP). Magnetar Capital has a $18.6 million position in the stock, comprising 0.3% of its 13F portfolio. The second largest stake is held by Contrarian Capital, led by Jon Bauer, holding a $1.5 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Other professional money managers that are bullish include Millennium Management, one of the 10 largest hedge funds in the world, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Jim Simons’ Renaissance Technologies. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now take a look at hedge fund activity in other stocks similar to Archrock Partners LP (NASDAQ:APLP). We will take a look at New Mountain Finance Corp. (NYSE:NMFC), Hibbett Sports, Inc. (NASDAQ:HIBB), NutriSystem Inc. (NASDAQ:NTRI), and Lydall, Inc. (NYSE:LDL). This group of stocks’ market valuations resemble APLP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NMFC | 11 | 15004 | 1 |
| HIBB | 9 | 21692 | -4 |
| NTRI | 19 | 152587 | -4 |
| LDL | 12 | 67062 | -1 |
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $22 million in APLP’s case. NutriSystem Inc. (NASDAQ:NTRI) is the most popular stock in this table. On the other hand Hibbett Sports, Inc. (NASDAQ:HIBB) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Archrock Partners LP (NASDAQ:APLP) is even less popular than HIBB. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
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