Should I Buy BP Midstream Partners LP (BPMP)?

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 have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider BP Midstream Partners LP (NYSE:BPMP) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is BP Midstream Partners LP (NYSE:BPMP) the right investment to pursue these days? Prominent investors were in an optimistic mood. The number of bullish hedge fund bets increased by 2 recently. BP Midstream Partners LP (NYSE:BPMP) was in 5 hedge funds’ portfolios at the end of September. The all time high for this statistics is 6. Our calculations also showed that BPMP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 3 hedge funds in our database with BPMP positions at the end of the second quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ian Wace of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a look at the latest hedge fund action regarding BP Midstream Partners LP (NYSE:BPMP).

What have hedge funds been doing with BP Midstream Partners LP (NYSE:BPMP)?

At third quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BPMP over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

More specifically, Arrowstreet Capital was the largest shareholder of BP Midstream Partners LP (NYSE:BPMP), with a stake worth $4.1 million reported as of the end of September. Trailing Arrowstreet Capital was Heronetta Management, which amassed a stake valued at $1.9 million. Marshall Wace LLP, First Pacific Advisors LLC, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Heronetta Management allocated the biggest weight to BP Midstream Partners LP (NYSE:BPMP), around 1.91% of its 13F portfolio. First Pacific Advisors LLC is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to BPMP.

Now, key money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the biggest position in BP Midstream Partners LP (NYSE:BPMP). Marshall Wace LLP had $1.4 million invested in the company at the end of the quarter. Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC also initiated a $0.9 million position during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as BP Midstream Partners LP (NYSE:BPMP) but similarly valued. We will take a look at TriMas Corp (NASDAQ:TRS), Esperion Therapeutics (NASDAQ:ESPR), BrightSphere Investment Group Inc (NYSE:BSIG), PGT Innovations Inc. (NASDAQ:PGTI), EVO Payments, Inc. (NASDAQ:EVOP), Brooge Energy Limited (NASDAQ:BROG), and GMS Inc. (NYSE:GMS). This group of stocks’ market values resemble BPMP’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $8 million in BPMP’s case. BrightSphere Investment Group Inc (NYSE:BSIG) is the most popular stock in this table. On the other hand Brooge Energy Limited (NASDAQ:BROG) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks BP Midstream Partners LP (NYSE:BPMP) is even less popular than BROG. Our overall hedge fund sentiment score for BPMP is 32. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on BPMP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on BPMP as the stock returned 19.2% since Q3 (through November 27th) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.