Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is Viper Energy Partners LP (NASDAQ:VNOM) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Viper Energy Partners LP (NASDAQ:VNOM) was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2019. VNOM investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. There were 15 hedge funds in our database with VNOM holdings at the end of the previous quarter. Our calculations also showed that VNOM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
George Soros of Soros Fund Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Now we’re going to take a glance at the fresh hedge fund action regarding Viper Energy Partners LP (NASDAQ:VNOM).
What does smart money think about Viper Energy Partners LP (NASDAQ:VNOM)?
Heading into the first quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VNOM over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Amy Minella’s Cardinal Capital has the most valuable position in Viper Energy Partners LP (NASDAQ:VNOM), worth close to $41.7 million, corresponding to 1.3% of its total 13F portfolio. Sitting at the No. 2 spot is Alyeska Investment Group, managed by Anand Parekh, which holds a $19.8 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions consist of Till Bechtolsheimer’s Arosa Capital Management, Vince Maddi and Shawn Brennan’s SIR Capital Management and George Soros’s Soros Fund Management. In terms of the portfolio weights assigned to each position Arosa Capital Management allocated the biggest weight to Viper Energy Partners LP (NASDAQ:VNOM), around 1.85% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, setting aside 1.6 percent of its 13F equity portfolio to VNOM.
Consequently, some big names were breaking ground themselves. Tiger Eye Capital, managed by Ben Gambill, assembled the most valuable position in Viper Energy Partners LP (NASDAQ:VNOM). Tiger Eye Capital had $3.3 million invested in the company at the end of the quarter. Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC also made a $2.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Travis Cocke’s Voss Capital and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Viper Energy Partners LP (NASDAQ:VNOM) but similarly valued. We will take a look at First Hawaiian, Inc. (NASDAQ:FHB), Eagle Materials, Inc. (NYSE:EXP), Murphy USA Inc. (NYSE:MUSA), and SLM Corp (NASDAQ:SLM). This group of stocks’ market valuations are similar to VNOM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FHB | 18 | 170316 | -2 |
| EXP | 38 | 537210 | -2 |
| MUSA | 28 | 330732 | 6 |
| SLM | 39 | 634486 | 10 |
| Average | 30.75 | 418186 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $418 million. That figure was $103 million in VNOM’s case. SLM Corp (NASDAQ:SLM) is the most popular stock in this table. On the other hand First Hawaiian, Inc. (NASDAQ:FHB) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Viper Energy Partners LP (NASDAQ:VNOM) is even less popular than FHB. Hedge funds dodged a bullet by taking a bearish stance towards VNOM. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately VNOM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); VNOM investors were disappointed as the stock returned -72.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
