The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards EnLink Midstream Partners LP (NYSE:ENLK), and what that likely means for the prospects of the company and its stock.
EnLink Midstream Partners LP (NYSE:ENLK) has experienced a decrease in hedge fund sentiment recently. 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 athenahealth, Inc (NASDAQ:ATHN), Turquoise Hill Resources Ltd (NYSE:TRQ), and Huntington Ingalls Industries Inc (NYSE:HII) to gather more data points.
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To most traders, hedge funds are seen as unimportant, old financial tools of the past. While there are over 8000 funds in operation at the moment, Our researchers hone in on the masters of this group, about 700 funds. These hedge fund managers watch over the lion’s share of the hedge fund industry’s total asset base, and by observing their best picks, Insider Monkey has found many investment strategies that have historically beaten the broader indices. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Keeping this in mind, let’s review the recent action surrounding EnLink Midstream Partners LP (NYSE:ENLK).
How are hedge funds trading EnLink Midstream Partners LP (NYSE:ENLK)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Magnetar Capital, managed by Alec Litowitz and Ross Laser, holds the number one position in EnLink Midstream Partners LP (NYSE:ENLK). Magnetar Capital has a $98.9 million position in the stock, comprising 2.6% of its 13F portfolio. Sitting at the No. 2 spot is Wexford Capital, led by Charles Davidson, holding a $30.3 million position; 5.9% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions contain James Dondero’s Highland Capital Management, Jim Simons’s Renaissance Technologies and Matthew Hulsizer’s PEAK6 Capital Management.
Because EnLink Midstream Partners LP (NYSE:ENLK) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of funds that elected to cut their entire stakes heading into Q4. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dropped the largest stake of all the hedgies tracked by Insider Monkey, totaling an estimated $1.8 million in stock, and George Hall’s Clinton Group was right behind this move, as the fund said goodbye to about $0.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to EnLink Midstream Partners LP (NYSE:ENLK). We will take a look at athenahealth, Inc (NASDAQ:ATHN), Turquoise Hill Resources Ltd (NYSE:TRQ), Huntington Ingalls Industries Inc (NYSE:HII), and The Ultimate Software Group, Inc. (NASDAQ:ULTI). This group of stocks’ market caps are similar to ENLK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATHN | 18 | 423614 | 0 |
| TRQ | 21 | 424895 | -4 |
| HII | 32 | 495637 | 7 |
| ULTI | 16 | 192106 | 1 |
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $384 million. That figure was $132 million in ENLK’s case. Huntington Ingalls Industries Inc (NYSE:HII) is the most popular stock in this table. On the other hand The Ultimate Software Group, Inc. (NASDAQ:ULTI) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks EnLink Midstream Partners LP (NYSE:ENLK) is even less popular than ULTI. 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.
