Should I Buy Hoegh LNG Partners LP (HMLP)?

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. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2020. In this article we are going to take a look at smart money sentiment towards Hoegh LNG Partners LP (NYSE:HMLP).

Hoegh LNG Partners LP (NYSE:HMLP) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that HMLP 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). 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 Customers Bancorp Inc (NYSE:CUBI), IMARA Inc. (NASDAQ:IMRA), and Alliance Resource Partners, L.P. (NASDAQ:ARLP) to gather more data points.

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.

Michael Gelband of ExodusPoint Capital

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. Now we’re going to take a look at the new hedge fund action surrounding Hoegh LNG Partners LP (NYSE:HMLP).

How have hedgies been trading Hoegh LNG Partners LP (NYSE:HMLP)?

At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in HMLP over the last 21 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in Hoegh LNG Partners LP (NYSE:HMLP) was held by Renaissance Technologies, which reported holding $7.9 million worth of stock at the end of September. It was followed by Huber Capital Management with a $2 million position. Other investors bullish on the company included Arrowstreet Capital, Prescott Group Capital Management, and Engineers Gate Manager. In terms of the portfolio weights assigned to each position Huber Capital Management allocated the biggest weight to Hoegh LNG Partners LP (NYSE:HMLP), around 0.72% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, setting aside 0.45 percent of its 13F equity portfolio to HMLP.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: ExodusPoint Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Engineers Gate Manager).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Hoegh LNG Partners LP (NYSE:HMLP) but similarly valued. We will take a look at Customers Bancorp Inc (NYSE:CUBI), IMARA Inc. (NASDAQ:IMRA), Alliance Resource Partners, L.P. (NASDAQ:ARLP), Dynex Capital Inc (NYSE:DX), MRC Global Inc (NYSE:MRC), MEI Pharma Inc (NASDAQ:MEIP), and AC Immune SA (NASDAQ:ACIU). This group of stocks’ market valuations match HMLP’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.3 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $12 million in HMLP’s case. MRC Global Inc (NYSE:MRC) is the most popular stock in this table. On the other hand Alliance Resource Partners, L.P. (NASDAQ:ARLP) is the least popular one with only 4 bullish hedge fund positions. Hoegh LNG Partners LP (NYSE:HMLP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HMLP is 27.3. 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. 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 HMLP as the stock returned 39.2% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.

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