We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like KNOT Offshore Partners LP (NYSE:KNOP).
KNOT Offshore Partners LP (NYSE:KNOP) has experienced an increase in support from the world’s most elite money managers recently. Our calculations also showed that KNOP isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the new hedge fund action surrounding KNOT Offshore Partners LP (NYSE:KNOP).
Hedge fund activity in KNOT Offshore Partners LP (NYSE:KNOP)
At Q2’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in KNOP a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of KNOT Offshore Partners LP (NYSE:KNOP), with a stake worth $9.7 million reported as of the end of March. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $6.6 million. McKinley Capital Management, Citadel Investment Group, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key money managers have jumped into KNOT Offshore Partners LP (NYSE:KNOP) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, established the biggest position in KNOT Offshore Partners LP (NYSE:KNOP). PEAK6 Capital Management had $0 million invested in the company at the end of the quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as KNOT Offshore Partners LP (NYSE:KNOP) but similarly valued. These stocks are Luther Burbank Corporation (NASDAQ:LBC), WideOpenWest, Inc. (NYSE:WOW), Tristate Capital Holdings Inc (NASDAQ:TSC), and Stemline Therapeutics Inc (NASDAQ:STML). This group of stocks’ market caps are similar to KNOP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LBC | 7 | 9917 | 1 |
| WOW | 8 | 15124 | -3 |
| TSC | 10 | 47224 | -3 |
| STML | 17 | 226395 | -3 |
| Average | 10.5 | 74665 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $18 million in KNOP’s case. Stemline Therapeutics Inc (NASDAQ:STML) is the most popular stock in this table. On the other hand Luther Burbank Corporation (NASDAQ:LBC) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks KNOT Offshore Partners LP (NYSE:KNOP) is even less popular than LBC. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on KNOP, though not to the same extent, as the stock returned 2.7% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
