Is Sunoco LP (SUN) A Good Stock To Buy?

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Sunoco LP (NYSE:SUN) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of September, same as at the end of June. 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 Sibanye Gold Ltd (ADR) (NYSE:SBGL), Apple Hospitality REIT Inc (NYSE:APLE), and ONE Gas Inc (NYSE:OGS) to gather more data points.

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.

Maridav/Shutterstock.com

How have hedgies been trading Sunoco LP (NYSE:SUN)?

Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SUN over the last 5 quarters, which remained within a narrow range, gaining 20% in 2016. So, let’s see 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, Magnetar Capital, led by Alec Litowitz and Ross Laser, holds the largest position in Sunoco LP (NYSE:SUN). Magnetar Capital has a $13.7 million position in the stock. The second largest stake is held by BP Capital, led by T Boone Pickens, which holds an $11.9 million position; the fund has 4.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions contain Leighton Welch’s Welch Capital Partners, Matthew Halbower’s Pentwater Capital Management, and Jeff Lignelli’s Incline Global Management. 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.

Since Sunoco LP (NYSE:SUN) has faced a decline in interest from the smart money, we can see that there is a sect of funds who were dropping their positions entirely heading into Q4. Interestingly, Charles Davidson’s Wexford Capital sold off the biggest position of all the hedgies tracked by Insider Monkey, worth an estimated $6.5 million in stock, and Ed Bosek’s BeaconLight Capital was right behind this move, as the fund sold off about $6.2 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Sunoco LP (NYSE:SUN) but similarly valued. We will take a look at Sibanye Gold Ltd (ADR) (NYSE:SBGL), Apple Hospitality REIT Inc (NYSE:APLE), ONE Gas Inc (NYSE:OGS), and Hawaiian Electric Industries, Inc. (NYSE:HE). All of these stocks’ market caps match SUN’s market cap.

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 $58 million. That figure was $48 million in SUN’s case. Hawaiian Electric Industries, Inc. (NYSE:HE) is the most popular stock in this table. On the other hand Sibanye Gold Ltd (ADR) (NYSE:SBGL) is the least popular one with only 8 bullish hedge fund positions. Sunoco LP (NYSE:SUN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on recently. In this regard HE might be a better candidate to consider taking a long position in.

Disclosure: None