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Are Hedge Funds Going To Get Burned By Noble Midstream Partners LP (NBLX) ?

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether Noble Midstream Partners LP (NASDAQ:NBLX) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Is Noble Midstream Partners LP (NASDAQ:NBLX) going to take off soon? The smart money is betting on the stock. The number of bullish hedge fund bets increased by 1 lately. Our calculations also showed that NBLX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

In the financial world there are a multitude of gauges stock market investors have at their disposal to size up their stock investments. A duo of the less known gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outpace the broader indices by a superb margin (see the details here).

T Boone Pickens of BP Capital

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the latest hedge fund action encompassing Noble Midstream Partners LP (NASDAQ:NBLX).

What does smart money think about Noble Midstream Partners LP (NASDAQ:NBLX)?

At Q4’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NBLX over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the most valuable position in Noble Midstream Partners LP (NASDAQ:NBLX). Arrowstreet Capital has a $5.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by PEAK6 Capital Management, led by Matthew Hulsizer, holding a $1.1 million call position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism comprise Ken Griffin’s Citadel Investment Group, T Boone Pickens’s BP Capital and Renaissance Technologies. In terms of the portfolio weights assigned to each position BP Capital allocated the biggest weight to Noble Midstream Partners LP (NASDAQ:NBLX), around 0.97% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to NBLX.

Consequently, key money managers have jumped into Noble Midstream Partners LP (NASDAQ:NBLX) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in Noble Midstream Partners LP (NASDAQ:NBLX). Arrowstreet Capital had $5.1 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $0.7 million position during the quarter. The only other fund with a new position in the stock is Richard Driehaus’s Driehaus Capital.

Let’s now review hedge fund activity in other stocks similar to Noble Midstream Partners LP (NASDAQ:NBLX). These stocks are Fabrinet (NYSE:FN), Steelcase Inc. (NYSE:SCS), Kontoor Brands, Inc. (NYSE:KTB), and M.D.C. Holdings, Inc. (NYSE:MDC). This group of stocks’ market values are closest to NBLX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FN 25 223783 3
SCS 30 163843 6
KTB 14 102169 -7
MDC 17 107469 -2
Average 21.5 149316 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $7 million in NBLX’s case. Steelcase Inc. (NYSE:SCS) is the most popular stock in this table. On the other hand Kontoor Brands, Inc. (NYSE:KTB) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Noble Midstream Partners LP (NASDAQ:NBLX) is even less popular than KTB. Hedge funds dodged a bullet by taking a bearish stance towards NBLX. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately NBLX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NBLX investors were disappointed as the stock returned -88% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Disclosure: None. This article was originally published at Insider Monkey.

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