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Hedge Funds Are Betting On Phillips 66 Partners LP (PSXP)

While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, declining oil prices and the trade war with China, many smart money investors kept their optimism regarding the current bull run in the fourth quarter, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Phillips 66 Partners LP (NYSE:PSXP).

Phillips 66 Partners LP (NYSE:PSXP) has seen an increase in hedge fund interest recently. PSXP was in 6 hedge funds’ portfolios at the end of December. There were 4 hedge funds in our database with PSXP holdings at the end of the previous quarter. Our calculations also showed that PSXP isn’t among the 30 most popular stocks among hedge funds.

If you’d ask most investors, hedge funds are assumed to be slow, old financial tools of yesteryear. While there are greater than 8000 funds in operation today, Our researchers hone in on the leaders of this club, approximately 750 funds. These money managers direct the majority of all hedge funds’ total capital, and by following their unrivaled investments, Insider Monkey has determined a few investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

BP CAPITAL

Let’s take a gander at the fresh hedge fund action regarding Phillips 66 Partners LP (NYSE:PSXP).

How are hedge funds trading Phillips 66 Partners LP (NYSE:PSXP)?

At Q4’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in PSXP a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

PSXP

Among these funds, BP Capital held the most valuable stake in Phillips 66 Partners LP (NYSE:PSXP), which was worth $3.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $3.6 million worth of shares. Moreover, Citadel Investment Group, Arrowstreet Capital, and Driehaus Capital were also bullish on Phillips 66 Partners LP (NYSE:PSXP), allocating a large percentage of their portfolios to this stock.

As aggregate interest increased, key money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the largest position in Phillips 66 Partners LP (NYSE:PSXP). Arrowstreet Capital had $1.1 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $1.1 million investment in the stock during the quarter. The other funds with brand new PSXP positions are Ken Griffin’s Citadel Investment Group and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Phillips 66 Partners LP (NYSE:PSXP) but similarly valued. These stocks are EQT Midstream Partners LP (NYSE:EQM), Watsco Inc (NYSE:WSO), Companhia Energética de Minas Gerais (NYSE:CIG), and James Hardie Industries plc (NYSE:JHX). This group of stocks’ market values are similar to PSXP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EQM 8 53758 0
WSO 14 134848 -3
CIG 7 13598 1
JHX 2 3804 0
Average 7.75 51502 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $12 million in PSXP’s case. Watsco Inc (NYSE:WSO) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular one with only 2 bullish hedge fund positions. Phillips 66 Partners LP (NYSE:PSXP) is not the least popular stock in this group but hedge fund interest is still below average though hedge funds are starting to buy the stock. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. A few hedge funds were also right about betting on PSXP as the stock returned 26.4% and outperformed the market as well.

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

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