Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Hedge fund interest in DCP Midstream Partners, LP (NYSE:DPM) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Urban Outfitters, Inc. (NASDAQ:URBN), Curtiss-Wright Corp. (NYSE:CW), and Teradata Corporation (NYSE:TDC) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, we’re going to take a look at the latest action regarding DCP Midstream Partners, LP (NYSE:DPM).
How have hedgies been trading DCP Midstream Partners, LP (NYSE:DPM)?
Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in DPM heading into this year. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, holds the biggest position in DCP Midstream Partners, LP (NYSE:DPM). Renaissance Technologies has a $13.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is David Cohen and Harold Levy of Iridian Asset Management, with a $5.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish comprise Israel Englander’s Millennium Management, George Hall’s Clinton Group and Paul Marshall and Ian Wace’s Marshall Wace LLP. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually cut their positions entirely. At the top of the heap, Jean-Marie Eveillard’s First Eagle Investment Management cut the largest investment of all the investors followed by Insider Monkey, totaling about $110.4 million in stock. John Horseman’s fund, Horseman Capital Management, also cut its stock, about $8.8 million worth.
Let’s also examine hedge fund activity in other stocks similar to DCP Midstream Partners, LP (NYSE:DPM). These stocks are Urban Outfitters, Inc. (NASDAQ:URBN), Curtiss-Wright Corp. (NYSE:CW), Teradata Corporation (NYSE:TDC), and First Solar, Inc. (NASDAQ:FSLR). This group of stocks’ market caps match DPM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| URBN | 25 | 271624 | 0 |
| CW | 17 | 217291 | 1 |
| TDC | 23 | 377584 | -3 |
| FSLR | 23 | 245591 | -7 |
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $278 million. That figure was $22 million in DPM’s case. Urban Outfitters, Inc. (NASDAQ:URBN) is the most popular stock in this table. On the other hand Curtiss-Wright Corp. (NYSE:CW) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks DCP Midstream Partners, LP (NYSE:DPM) is even less popular than CW. 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.
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