Here is What Hedge Funds Think About Shell Midstream Partners LP (SHLX)

While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, the low commodity prices and the economic turmoil in China, many smart money investors are keeping their optimism regarding the current bull run, 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 Shell Midstream Partners LP (NYSE:SHLX).

Is Shell Midstream Partners LP (NYSE:SHLX) a buy right now? Investors who are in the know are getting more bullish. The number of bullish hedge fund positions went up by 2 lately. SHLX was in 10 hedge funds’ portfolios at the end of the third quarter of 2015. There were 8 hedge funds in our database with SHLX positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as FNFV Group (NYSE:FNFV), Murphy Oil Corporation (NYSE:MUR), and Watsco Inc (NYSE:WSO) to gather more data points.

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In the financial world there are plenty of gauges shareholders put to use to grade stocks. A couple of the most innovative gauges are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the elite money managers can trounce their index-focused peers by a solid amount (see the details here).

With all of this in mind, we’re going to take a gander at the new action encompassing Shell Midstream Partners LP (NYSE:SHLX).

How are hedge funds trading Shell Midstream Partners LP (NYSE:SHLX)?

Heading into Q4, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the second quarter. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Zimmer Partners, managed by Stuart J. Zimmer, holds the most valuable position in Shell Midstream Partners LP (NYSE:SHLX). Zimmer Partners has a $21.2 million position in the stock, comprising 1.6% of its 13F portfolio. On Zimmer Partners’s heels is Highland Capital Management, managed by James Dondero, which holds a $5.7 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish comprise Jim Simons’s Renaissance Technologies, Dmitry Balyasny’s Balyasny Asset Management and Russell Lucas’s Lucas Capital Management.

As one would reasonably expect, some big names were leading the bulls’ herd. Zimmer Partners, managed by Stuart J. Zimmer, assembled the most outsized position in Shell Midstream Partners LP (NYSE:SHLX). Zimmer Partners had $21.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Sander Gerber’s Hudson Bay Capital Management, and Richard Driehaus’s Driehaus Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Shell Midstream Partners LP (NYSE:SHLX) but similarly valued. These stocks are FNFV Group (NYSE:FNFV), Murphy Oil Corporation (NYSE:MUR), Watsco Inc (NYSE:WSO), and Och-Ziff Capital Management Group LLC (NYSE:OZM). This group of stocks’ market values resemble SHLX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FNFV 27 237937 1
MUR 27 444035 3
WSO 16 191180 1
OZM 12 34456 1

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $227 million. That figure was $39 million in SHLX’s case. FNFV Group (NYSE:FNFV) is the most popular stock in this table. On the other hand Och-Ziff Capital Management Group LLC (NYSE:OZM) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Shell Midstream Partners LP (NYSE:SHLX) is even less popular than OZM. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.