Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: MPLX LP (NYSE:MPLX).
MPLX LP (NYSE:MPLX) was in 11 hedge funds’ portfolios at the end of September. MPLX has experienced a decrease in hedge fund interest in recent months. There were 12 hedge funds in our database with MPLX holdings at the end of the previous quarter. Our calculations also showed that mplx isn’t among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to view the key hedge fund action encompassing MPLX LP (NYSE:MPLX).
What does the smart money think about MPLX LP (NYSE:MPLX)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MPLX over the last 13 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, Stockbridge Partners was the largest shareholder of MPLX LP (NYSE:MPLX), with a stake worth $184.6 million reported as of the end of September. Trailing Stockbridge Partners was Zimmer Partners, which amassed a stake valued at $102.2 million. Everett Capital Advisors, Highland Capital Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that MPLX LP (NYSE:MPLX) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of funds that slashed their positions entirely last quarter. Intriguingly, Kelly Hampaul’s Everett Capital Advisors sold off the largest investment of the 700 funds followed by Insider Monkey, worth close to $38.2 million in stock, and Thomas E. Claugus’s GMT Capital was right behind this move, as the fund sold off about $21.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to MPLX LP (NYSE:MPLX). We will take a look at ICICI Bank Limited (NYSE:IBN), Royal Caribbean Cruises Ltd. (NYSE:RCL), CRH PLC (NYSE:CRH), and Zimmer Biomet Holdings Inc (NYSE:ZBH). This group of stocks’ market values are closest to MPLX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBN | 22 | 426495 | 0 |
| RCL | 42 | 2207182 | 4 |
| CRH | 7 | 42283 | 1 |
| ZBH | 40 | 1596234 | 5 |
| Average | 27.75 | 1068049 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.07 billion. That figure was $355 million in MPLX’s case. Royal Caribbean Cruises Ltd. (NYSE:RCL) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 7 bullish hedge fund positions. MPLX LP (NYSE:MPLX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RCL might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
