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Hedge Funds Keep Selling Plains All American Pipeline, L.P. (PAA)

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 plowed through 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of Plains All American Pipeline, L.P. (NYSE:PAA).

Plains All American Pipeline, L.P. (NYSE:PAA) has experienced a decrease in activity from the world’s largest hedge funds in recent months. Our calculations also showed that PAA 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 financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the latest hedge fund action encompassing Plains All American Pipeline, L.P. (NYSE:PAA).

How have hedgies been trading Plains All American Pipeline, L.P. (NYSE:PAA)?

At Q1’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in PAA a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Is PAA A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the largest position in Plains All American Pipeline, L.P. (NYSE:PAA), worth close to $23.4 million, accounting for 0.1% of its total 13F portfolio. The second largest stake is held by Stuart J. Zimmer of Zimmer Partners, with a $15.3 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Michael Price’s MFP Investors, Henry Breck’s Heronetta Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Heronetta Management allocated the biggest weight to Plains All American Pipeline, L.P. (NYSE:PAA), around 2.2% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, setting aside 0.45 percent of its 13F equity portfolio to PAA.

Seeing as Plains All American Pipeline, L.P. (NYSE:PAA) has witnessed falling interest from the smart money, we can see that there were a few money managers who sold off their full holdings last quarter. Intriguingly,  Renaissance Technologies dropped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $5.1 million in stock. T Boone Pickens’s fund, BP Capital, also dumped its stock, about $5.1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Plains All American Pipeline, L.P. (NYSE:PAA). We will take a look at Allison Transmission Holdings Inc (NYSE:ALSN), Cirrus Logic, Inc. (NASDAQ:CRUS), Tandem Diabetes Care Inc (NASDAQ:TNDM), and Cree, Inc. (NASDAQ:CREE). This group of stocks’ market values are similar to PAA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALSN 27 404743 -6
CRUS 28 286330 3
TNDM 28 245964 -11
CREE 16 309952 -9
Average 24.75 311747 -5.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $312 million. That figure was $45 million in PAA’s case. Cirrus Logic, Inc. (NASDAQ:CRUS) is the most popular stock in this table. On the other hand Cree, Inc. (NASDAQ:CREE) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Plains All American Pipeline, L.P. (NYSE:PAA) is even less popular than CREE. Hedge funds clearly dropped the ball on PAA as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on PAA as the stock returned 89.6% so far in the second quarter and outperformed the market by an even larger margin.

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