Hedge Funds Are Digging Holly Energy Partners, L.P. (HEP)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Holly Energy Partners, L.P. (NYSE:HEP) based on that data.

Holly Energy Partners, L.P. (NYSE:HEP) was in 6 hedge funds’ portfolios at the end of the first quarter of 2020. HEP investors should be aware of an increase in hedge fund sentiment lately. There were 5 hedge funds in our database with HEP holdings at the end of the previous quarter. Our calculations also showed that HEP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most investors, hedge funds are assumed to be worthless, outdated financial tools of years past. While there are greater than 8000 funds trading at present, We choose to focus on the upper echelon of this group, about 850 funds. Most estimates calculate that this group of people preside over the majority of the hedge fund industry’s total asset base, and by paying attention to their top investments, Insider Monkey has discovered various investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to go over the recent hedge fund action regarding Holly Energy Partners, L.P. (NYSE:HEP).

What have hedge funds been doing with Holly Energy Partners, L.P. (NYSE:HEP)?

At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in HEP a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Arrowstreet Capital was the largest shareholder of Holly Energy Partners, L.P. (NYSE:HEP), with a stake worth $2.7 million reported as of the end of September. Trailing Arrowstreet Capital was Citadel Investment Group, which amassed a stake valued at $1.4 million. Marshall Wace LLP, JS Capital, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position JS Capital allocated the biggest weight to Holly Energy Partners, L.P. (NYSE:HEP), around 0.04% of its 13F portfolio. Marshall Wace LLP is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to HEP.

As aggregate interest increased, key hedge funds were breaking ground themselves. JS Capital, managed by Jonathan Soros, initiated the largest position in Holly Energy Partners, L.P. (NYSE:HEP). JS Capital had $0.3 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.2 million position during the quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Holly Energy Partners, L.P. (NYSE:HEP). These stocks are Taylor Morrison Home Corp (NYSE:TMHC), AssetMark Financial Holdings, Inc. (NYSE:AMK), Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), and Ingevity Corporation (NYSE:NGVT). This group of stocks’ market valuations match HEP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TMHC 28 214982 0
AMK 4 25078 -2
KTOS 18 44967 2
NGVT 29 166562 2
Average 19.75 112897 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $6 million in HEP’s case. Ingevity Corporation (NYSE:NGVT) is the most popular stock in this table. On the other hand AssetMark Financial Holdings, Inc. (NYSE:AMK) is the least popular one with only 4 bullish hedge fund positions. Holly Energy Partners, L.P. (NYSE:HEP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately HEP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HEP investors were disappointed as the stock returned 22.3% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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