Is Capital Product Partners L.P. (CPLP) Going to Burn These Hedge Funds?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the third quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Capital Product Partners L.P. (NASDAQ:CPLP) to find out whether it was one of their high conviction long-term ideas.

Capital Product Partners L.P. (NASDAQ:CPLP) has seen a decrease in hedge fund interest lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Sun Hydraulics Corporation (NASDAQ:SNHY), 8×8, Inc. (NASDAQ:EGHT), and MacroGenics Inc (NASDAQ:MGNX) to gather more data points.

In the eyes of most market participants, hedge funds are assumed to be worthless, outdated financial tools of yesteryear. While there are over an 8000 funds in operation at the moment, Our researchers look at the leaders of this club, approximately 700 funds. These investment experts administer bulk of all hedge funds’ total capital, and by paying attention to their highest performing investments, Insider Monkey has identified many investment strategies that have historically outrun the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, let’s take a peek at the latest action surrounding Capital Product Partners L.P. (NASDAQ:CPLP).

Hedge fund activity in Capital Product Partners L.P. (NASDAQ:CPLP)

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from one quarter earlier. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Howard Marks’ Oaktree Capital Management has the number one position in Capital Product Partners L.P. (NASDAQ:CPLP), worth close to $3.8 million, accounting for less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $2.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish encompass Robert B. Gillam’s McKinley Capital Management, Matthew Taylor and Ty Popplewell’s Kortright Capital Partners and Jim Simons’ Renaissance Technologies.

Judging by the fact that Capital Product Partners L.P. (NASDAQ:CPLP) has experienced a decline in interest from hedge fund managers, it’s easy to see that there were a few funds who were dropping their positions entirely last quarter. It’s worth mentioning that Israel Englander’s Millennium Management said goodbye to the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at close to $0.3 million in stock, and Bruce Silver’s Silver Capital Management LLC was right behind this move, as the fund dumped about $0.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 3 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Capital Product Partners L.P. (NASDAQ:CPLP). We will take a look at Sun Hydraulics Corporation (NASDAQ:SNHY), 8×8, Inc. (NASDAQ:EGHT), MacroGenics Inc (NASDAQ:MGNX), and Hercules Technology Growth Capital Inc (NYSE:HTGC). This group of stocks’ market caps resemble CPLP’s market cap.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was just $7 million in CPLP’s case. MacroGenics Inc (NASDAQ:MGNX) is the most popular stock in this table, while Sun Hydraulics Corporation (NASDAQ:SNHY) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Capital Product Partners L.P. (NASDAQ:CPLP) is even less popular than SNHY. 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 required.