Hedge Funds Have Never Been More Bullish On Hess Midstream Partners LP (HESM)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have gone over 730 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 28th. In this article we look at what those investors think of Hess Midstream Partners LP (NYSE:HESM).

Hedge fund interest in Hess Midstream Partners LP (NYSE:HESM) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare HESM to other stocks including Tennant Company (NYSE:TNC), The St. Joe Company (NYSE:JOE), and Primoris Services Corp (NASDAQ:PRIM) to get a better sense of its popularity. Our calculations also showed that HESM isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.


Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to analyze the latest hedge fund action regarding Hess Midstream Partners LP (NYSE:HESM).

Hedge fund activity in Hess Midstream Partners LP (NYSE:HESM)

At the end of the second quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in HESM a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Paul Marshall Marshall Wace

The largest stake in Hess Midstream Partners LP (NYSE:HESM) was held by Marshall Wace LLP, which reported holding $3.2 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $3.1 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Lucas Capital Management.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: BP Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Hess Midstream Partners LP (NYSE:HESM) but similarly valued. We will take a look at Tennant Company (NYSE:TNC), The St. Joe Company (NYSE:JOE), Primoris Services Corp (NASDAQ:PRIM), and Tactile Systems Technology, Inc. (NASDAQ:TCMD). This group of stocks’ market values are similar to HESM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TNC 6 64973 -9
JOE 12 506445 -1
PRIM 12 30523 2
TCMD 15 60665 -2
Average 11.25 165652 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $9 million in HESM’s case. Tactile Systems Technology, Inc. (NASDAQ:TCMD) is the most popular stock in this table. On the other hand Tennant Company (NYSE:TNC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Hess Midstream Partners LP (NYSE:HESM) is even less popular than TNC. Hedge funds dodged a bullet by taking a bearish stance towards HESM. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HESM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HESM investors were disappointed as the stock returned 0.8% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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