SemGroup Corp (SEMG): Are Hedge Funds Right About This Stock?

SemGroup Corp (NYSE:SEMG) has seen a decrease in support from the world’s most elite money managers in recent months.

To most traders, hedge funds are perceived as unimportant, old investment tools of years past. While there are over 8000 funds in operation today, we at Insider Monkey hone in on the bigwigs of this club, around 450 funds. Most estimates calculate that this group controls most of the smart money’s total capital, and by tracking their best investments, we have identified a number of investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as beneficial, positive insider trading activity is a second way to parse down the financial markets. There are lots of motivations for an upper level exec to downsize shares of his or her company, but just one, very simple reason why they would behave bullishly. Various academic studies have demonstrated the market-beating potential of this method if piggybackers know where to look (learn more here).

Keeping this in mind, it’s important to take a glance at the key action surrounding SemGroup Corp (NYSE:SEMG).

What does the smart money think about SemGroup Corp (NYSE:SEMG)?

Heading into Q2, a total of 31 of the hedge funds we track held long positions in this stock, a change of -9% from the previous quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially.

When looking at the hedgies we track, Lone Pine Capital, managed by Stephen Mandel, holds the biggest position in SemGroup Corp (NYSE:SEMG). Lone Pine Capital has a $202 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by Senator Investment Group, managed by Doug Silverman and Alexander Klabin, which held a $85.9 million position; the fund has 1% of its 13F portfolio invested in the stock. Some other peers with similar optimism include David Cohen and Harold Levy’s Iridian Asset Management, Martin Whitman’s Third Avenue Management and Kevin D. Eng’s Columbus Hill Capital Management.

Since SemGroup Corp (NYSE:SEMG) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of funds that slashed their entire stakes last quarter. Intriguingly, John Murphy’s Alydar Capital dumped the largest position of the “upper crust” of funds we watch, valued at about $21.1 million in stock.. Barry Rosenstein’s fund, JANA Partners, also cut its stock, about $21 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 3 funds last quarter.

What have insiders been doing with SemGroup Corp (NYSE:SEMG)?

Insider buying is particularly usable when the primary stock in question has experienced transactions within the past six months. Over the last half-year time frame, SemGroup Corp (NYSE:SEMG) has seen 1 unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to SemGroup Corp (NYSE:SEMG). These stocks are Holly Energy Partners, L.P. (NYSE:HEP) and Atlas Pipeline Partners, L.P. (NYSE:APL). All of these stocks are in the oil & gas pipelines industry and their market caps are closest to SEMG’s market cap.