We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Texas Pacific Land Corporation (NYSE:TPL).
Texas Pacific Land Corporation (NYSE:TPL) has experienced an increase in support from the world’s most elite money managers in recent months. Texas Pacific Land Corporation (NYSE:TPL) was in 24 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TPL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to analyze the key hedge fund action surrounding Texas Pacific Land Corporation (NYSE:TPL).
Do Hedge Funds Think TPL Is A Good Stock To Buy Now?
At the end of September, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the second quarter of 2021. On the other hand, there were a total of 13 hedge funds with a bullish position in TPL 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Murray Stahl’s Horizon Asset Management has the number one position in Texas Pacific Land Corporation (NYSE:TPL), worth close to $1.8613 billion, comprising 43.5% of its total 13F portfolio. The second largest stake is held by Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $22.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass John Overdeck and David Siegel’s Two Sigma Advisors, Ed Beddow and William Tichy’s Beddow Capital Management and Mitch Cantor’s Mountain Lake Investment Management. In terms of the portfolio weights assigned to each position Horizon Asset Management allocated the biggest weight to Texas Pacific Land Corporation (NYSE:TPL), around 43.49% of its 13F portfolio. Beddow Capital Management is also relatively very bullish on the stock, dishing out 8.14 percent of its 13F equity portfolio to TPL.
As aggregate interest increased, key money managers have jumped into Texas Pacific Land Corporation (NYSE:TPL) headfirst. Millennium Management, managed by Israel Englander, initiated the largest position in Texas Pacific Land Corporation (NYSE:TPL). Millennium Management had $4.5 million invested in the company at the end of the quarter. Jinghua Yan’s TwinBeech Capital also initiated a $1.2 million position during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Peter Algert’s Algert Global, and Stephen Mildenhall’s Contrarius Investment Management.
Let’s also examine hedge fund activity in other stocks similar to Texas Pacific Land Corporation (NYSE:TPL). These stocks are Life Storage, Inc. (NYSE:LSI), Cree, Inc. (NASDAQ:CREE), Lear Corporation (NYSE:LEA), Banco de Chile (NYSE:BCH), ICL Group Ltd. (NYSE:ICL), Erie Indemnity Company (NASDAQ:ERIE), and Ares Capital Corporation (NASDAQ:ARCC). This group of stocks’ market valuations are closest to TPL’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $290 million. That figure was $1974 million in TPL’s case. Lear Corporation (NYSE:LEA) is the most popular stock in this table. On the other hand ICL Group Ltd. (NYSE:ICL) is the least popular one with only 6 bullish hedge fund positions. Texas Pacific Land Corporation (NYSE:TPL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TPL is 72.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately TPL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TPL were disappointed as the stock returned 4.9% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Texas Pacific Land Trust (NYSE:TPL)
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Disclosure: None. This article was originally published at Insider Monkey.