We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Brigham Minerals, Inc. (NYSE:MNRL).
Is Brigham Minerals, Inc. (NYSE:MNRL) a buy here? Prominent investors are in an optimistic mood. The number of long hedge fund positions inched up by 9 in recent months. Our calculations also showed that MNRL 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).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 let’s analyze the key hedge fund action surrounding Brigham Minerals, Inc. (NYSE:MNRL).
What does smart money think about Brigham Minerals, Inc. (NYSE:MNRL)?
At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 64% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in MNRL a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Brigham Minerals, Inc. (NYSE:MNRL) was held by Deep Basin Capital, which reported holding $27.6 million worth of stock at the end of September. It was followed by Encompass Capital Advisors with a $27.3 million position. Other investors bullish on the company included Zimmer Partners, Adage Capital Management, and Portolan Capital Management. In terms of the portfolio weights assigned to each position Yaupon Capital allocated the biggest weight to Brigham Minerals, Inc. (NYSE:MNRL), around 4.08% of its 13F portfolio. Deep Basin Capital is also relatively very bullish on the stock, earmarking 2.63 percent of its 13F equity portfolio to MNRL.
Now, specific money managers have been driving this bullishness. Deep Basin Capital, managed by Matt Smith, created the largest position in Brigham Minerals, Inc. (NYSE:MNRL). Deep Basin Capital had $27.6 million invested in the company at the end of the quarter. Joseph Samuels’s Islet Management also initiated a $7 million position during the quarter. The other funds with new positions in the stock are Anand Parekh’s Alyeska Investment Group, Michael Gelband’s ExodusPoint Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Brigham Minerals, Inc. (NYSE:MNRL) but similarly valued. We will take a look at Ferro Corporation (NYSE:FOE), DHT Holdings Inc (NYSE:DHT), Materion Corp (NYSE:MTRN), and OFG Bancorp (NYSE:OFG). This group of stocks’ market valuations resemble MNRL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FOE | 16 | 159061 | -1 |
| DHT | 34 | 259748 | 10 |
| MTRN | 18 | 108787 | -1 |
| OFG | 11 | 52391 | -4 |
| Average | 19.75 | 144997 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $145 million. That figure was $140 million in MNRL’s case. DHT Holdings Inc (NYSE:DHT) is the most popular stock in this table. On the other hand OFG Bancorp (NYSE:OFG) is the least popular one with only 11 bullish hedge fund positions. Brigham Minerals, Inc. (NYSE:MNRL) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately MNRL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MNRL were disappointed as the stock returned -41.5% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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.
