Are Investors Right to Be Bearish On Magellan Midstream Partners, L.P. (MMP)?

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Millennium Management initiated the largest position in Magellan Midstream Partners, L.P. (NYSE:MMP). The fund had $13.2 million invested in the company at the end of the quarter. Charles Davidson’s Wexford Capital also made a $7 million investment in the stock during the quarter. The other funds with new positions in the stock are Sander Gerber’s Hudson Bay Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Richard Driehaus’ Driehaus Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Magellan Midstream Partners, L.P. (NYSE:MMP) but similarly valued. These stocks are The J.M. Smucker Company (NYSE:SJM), Rockwell Automation (NYSE:ROK), Seagate Technology PLC (NASDAQ:STX), and Molson Coors Brewing Company (NYSE:TAP). This group of stocks’ market valuations resembles Magellan Midstream Partners, L.P. (NYSE:MMP)’s market valuation.

As you can see, these stocks had an average of 46 hedge funds with bullish positions and the average amount invested in these stocks was $1.42 billion. That figure was $187 million in Magellan Midstream Partners, L.P. (NYSE:MMP)’s case. Molson Coors Brewing Company (NYSE:TAP) is the most popular stock in this table. On the other hand, Seagate Technology PLC (NASDAQ:STX) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks Magellan Midstream Partners, L.P. (NYSE:MMP) is even less popular than Seagate Technology PLC (NASDAQ:STX). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.