Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards PBF Logistics LP (NYSE:PBFX) to find out whether there were any major changes in hedge funds’ views.
PBF Logistics LP (NYSE:PBFX) has experienced a decrease in hedge fund interest of late. PBF Logistics LP (NYSE:PBFX) was in 3 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 4. There were 4 hedge funds in our database with PBFX holdings at the end of December. Our calculations also showed that PBFX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a gander at the key hedge fund action encompassing PBF Logistics LP (NYSE:PBFX).
Do Hedge Funds Think PBFX Is A Good Stock To Buy Now?
At the end of March, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in PBFX over the last 23 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in PBF Logistics LP (NYSE:PBFX) was held by Citadel Investment Group, which reported holding $0.7 million worth of stock at the end of December. It was followed by 683 Capital Partners with a $0.2 million position. The only other hedge fund that is bullish on the company was PEAK6 Capital Management.
Because PBF Logistics LP (NYSE:PBFX) has faced falling interest from the aggregate hedge fund industry, logic holds that there is a sect of funds who sold off their entire stakes in the first quarter. At the top of the heap, Jonathan Soros’s JS Capital sold off the largest investment of all the hedgies monitored by Insider Monkey, valued at close to $0.1 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dropped its stock, about $0.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the first quarter.
Let’s now review hedge fund activity in other stocks similar to PBF Logistics LP (NYSE:PBFX). We will take a look at Apartment Investment and Management Co. (NYSE:AIV), Banc of California, Inc. (NASDAQ:BANC), U.S. Silica Holdings Inc (NYSE:SLCA), Golden Nugget Online Gaming, Inc. (NASDAQ:GNOG), CM Life Sciences, Inc. (NASDAQ:CMLFU), Bryn Mawr Bank Corp. (NASDAQ:BMTC), and Tellurian Inc. (NASDAQ:TELL). This group of stocks’ market caps are similar to PBFX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AIV | 18 | 157085 | 1 |
| BANC | 14 | 51439 | 3 |
| SLCA | 18 | 191248 | 1 |
| GNOG | 10 | 34611 | -6 |
| CMLFU | 6 | 37392 | -6 |
| BMTC | 12 | 46863 | -5 |
| TELL | 12 | 28482 | 5 |
| Average | 12.9 | 78160 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $1 million in PBFX’s case. Apartment Investment and Management Co. (NYSE:AIV) is the most popular stock in this table. On the other hand CM Life Sciences, Inc. (NASDAQ:CMLFU) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks PBF Logistics LP (NYSE:PBFX) is even less popular than CMLFU. Our overall hedge fund sentiment score for PBFX is 26.5. 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 PBFX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on PBFX as the stock returned 9.5% since Q1 (through June 11th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
