It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Spectra Energy Partners, LP (NYSE:SEP).
Spectra Energy Partners, LP (NYSE:SEP) investors should be aware of a decrease in support from the world’s most successful money managers in recent months. SEP was in 9 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with SEP positions at the end of the previous quarter. At the end of this article we will also compare SEP to other stocks including Marathon Oil Corporation (NYSE:MRO), Microchip Technology Inc. (NASDAQ:MCHP), and Alcoa Inc (NYSE:AA) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Hedge fund activity in Spectra Energy Partners, LP (NYSE:SEP)
Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a fall of 31% from the second quarter of 2016. By comparison, 5 hedge funds held shares or bullish call options in SEP heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, holds the biggest position in Spectra Energy Partners, LP (NYSE:SEP). Renaissance Technologies has a $17.4 million position in the stock. The second largest stake is held by Israel Englander’s Millennium Management which holds a $15.1 million position. Some other professional money managers that hold long positions include Charles Davidson’s Wexford Capital, William Michaelcheck’s Mariner Investment Group and T Boone Pickens’ BP Capital. We should note that BP Capital is 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.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that dumped their entire stakes in the stock during the third quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the biggest investment of all the hedgies studied by Insider Monkey, valued at close to $7.5 million in stock, and Richard Driehaus’ Driehaus Capital was right behind this move, as the fund dropped about $4.7 million worth of shares.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Spectra Energy Partners, LP (NYSE:SEP) but similarly valued. We will take a look at Marathon Oil Corporation (NYSE:MRO), Microchip Technology Inc. (NASDAQ:MCHP), Alcoa Inc (NYSE:AA), and Henry Schein, Inc. (NASDAQ:HSIC). All of these stocks’ market caps match SEP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MRO | 22 | 213779 | -4 |
| MCHP | 23 | 295366 | 0 |
| AA | 34 | 2328194 | -4 |
| HSIC | 23 | 388072 | 0 |
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $806 million. That figure was $56 million in SEP’s case. Alcoa Inc (NYSE:AA) is the most popular stock in this table. On the other hand Marathon Oil Corporation (NYSE:MRO) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Spectra Energy Partners, LP (NYSE:SEP) is even less popular than MRO. 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.
Disclosure: None
