In this article you are going to find out whether hedge funds think Star Group L.P. (NYSE:SGU) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Star Group L.P. (NYSE:SGU) a bargain? Hedge funds are betting on the stock. The number of long hedge fund positions increased by 1 recently. Our calculations also showed that SGU 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). SGU was in 8 hedge funds’ portfolios at the end of March. There were 7 hedge funds in our database with SGU holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most shareholders, hedge funds are viewed as worthless, old investment tools of yesteryear. While there are greater than 8000 funds trading today, We look at the elite of this club, around 850 funds. Most estimates calculate that this group of people orchestrate most of the hedge fund industry’s total asset base, and by monitoring their unrivaled picks, Insider Monkey has unsheathed several investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum 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 .
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. With all of this in mind we’re going to analyze the key hedge fund action surrounding Star Group L.P. (NYSE:SGU).
Hedge fund activity in Star Group L.P. (NYSE:SGU)
At Q1’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in SGU over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Star Group L.P. (NYSE:SGU) was held by Bandera Partners, which reported holding $27.1 million worth of stock at the end of September. It was followed by Moab Capital Partners with a $16.3 million position. Other investors bullish on the company included Renaissance Technologies, Locust Wood Capital Advisers, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Bandera Partners allocated the biggest weight to Star Group L.P. (NYSE:SGU), around 22.8% of its 13F portfolio. Moab Capital Partners is also relatively very bullish on the stock, designating 6.77 percent of its 13F equity portfolio to SGU.
Now, key hedge funds were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, created the largest position in Star Group L.P. (NYSE:SGU). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Star Group L.P. (NYSE:SGU) but similarly valued. We will take a look at Rubius Therapeutics, Inc. (NASDAQ:RUBY), Catchmark Timber Trust Inc (NYSE:CTT), Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), and Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM). This group of stocks’ market caps are similar to SGU’s market cap.
|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 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $66 million in SGU’s case. Catchmark Timber Trust Inc (NYSE:CTT) is the most popular stock in this table. On the other hand Rubius Therapeutics, Inc. (NASDAQ:RUBY) is the least popular one with only 4 bullish hedge fund positions. Star Group L.P. (NYSE:SGU) 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 12.2% in 2020 through June 17th and surpassed the market by 14.8 percentage points. Unfortunately SGU wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SGU investors were disappointed as the stock returned 10.3% 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.
Disclosure: None. This article was originally published at Insider Monkey.