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 Sprague Resources LP (NYSE:SRLP).
Sprague Resources LP (NYSE:SRLP) investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. SRLP was in 4 hedge funds’ portfolios at the end of the first quarter of 2020. There were 3 hedge funds in our database with SRLP positions at the end of the previous quarter. Our calculations also showed that SRLP 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 44 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Howard Marks of Oaktree Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the new hedge fund action encompassing Sprague Resources LP (NYSE:SRLP).
What have hedge funds been doing with Sprague Resources LP (NYSE:SRLP)?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. By comparison, 2 hedge funds held shares or bullish call options in SRLP a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Oaktree Capital Management, managed by Howard Marks, holds the number one position in Sprague Resources LP (NYSE:SRLP). Oaktree Capital Management has a $17.7 million position in the stock, comprising 0.5% of its 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $0.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions include Ken Griffin’s Citadel Investment Group, Matthew Hulsizer’s PEAK6 Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Oaktree Capital Management allocated the biggest weight to Sprague Resources LP (NYSE:SRLP), around 0.5% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.0022 percent of its 13F equity portfolio to SRLP.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Oaktree Capital Management, managed by Howard Marks, created the biggest position in Sprague Resources LP (NYSE:SRLP). Oaktree Capital Management had $17.7 million invested in the company at the end of the quarter.
Let’s now review hedge fund activity in other stocks similar to Sprague Resources LP (NYSE:SRLP). We will take a look at TCG BDC, Inc. (NASDAQ:CGBD), Global Partners LP (NYSE:GLP), Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), and Crossamerica Partners LP (NYSE:CAPL). All of these stocks’ market caps are closest to SRLP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CGBD | 7 | 14522 | 0 |
| GLP | 3 | 3868 | -1 |
| CCO | 33 | 83014 | -9 |
| CAPL | 1 | 283 | 0 |
| Average | 11 | 25422 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $19 million in SRLP’s case. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) is the most popular stock in this table. On the other hand Crossamerica Partners LP (NYSE:CAPL) is the least popular one with only 1 bullish hedge fund positions. Sprague Resources LP (NYSE:SRLP) is not the least popular stock in this group but hedge fund interest is still below average. 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 gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on SRLP, though not to the same extent, as the stock returned 19.6% during the second quarter and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.