Here is What Hedge Funds Think About Usa Compression Partners LP (USAC)

In this article we are going to use hedge fund sentiment as a tool and determine whether Usa Compression Partners LP (NYSE:USAC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is Usa Compression Partners LP (NYSE:USAC) a bargain? Investors who are in the know were in a bullish mood. The number of bullish hedge fund positions improved by 1 recently. Usa Compression Partners LP (NYSE:USAC) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. Our calculations also showed that USAC isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s view the recent hedge fund action surrounding Usa Compression Partners LP (NYSE:USAC).

How have hedgies been trading Usa Compression Partners LP (NYSE:USAC)?

Heading into the fourth quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in USAC over the last 21 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the most valuable position in Usa Compression Partners LP (NYSE:USAC), worth close to $4.2 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Cyrus Capital Partners, led by Stephen C. Freidheim, holding a $2 million position; 0.5% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism consist of Ken Griffin’s Citadel Investment Group, Blair Baker’s Precept Capital Management and Russell Lucas’s Lucas Capital Management. In terms of the portfolio weights assigned to each position Cyrus Capital Partners allocated the biggest weight to Usa Compression Partners LP (NYSE:USAC), around 0.47% of its 13F portfolio. Lucas Capital Management is also relatively very bullish on the stock, dishing out 0.27 percent of its 13F equity portfolio to USAC.

As aggregate interest increased, specific money managers have been driving this bullishness. Cyrus Capital Partners, managed by Stephen C. Freidheim, established the biggest position in Usa Compression Partners LP (NYSE:USAC). Cyrus Capital Partners had $2 million invested in the company at the end of the quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Usa Compression Partners LP (NYSE:USAC) but similarly valued. These stocks are BioXcel Therapeutics, Inc. (NASDAQ:BTAI), Waddell & Reed Financial, Inc. (NYSE:WDR), Matador Resources Co (NYSE:MTDR), New York Mortgage Trust, Inc. (NASDAQ:NYMT), Atara Biotherapeutics Inc (NASDAQ:ATRA), Constellation Pharmaceuticals, Inc. (NASDAQ:CNST), and The Greenbrier Companies Inc (NYSE:GBX). All of these stocks’ market caps match USAC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BTAI 11 75492 -2
WDR 21 116258 -4
MTDR 16 69003 -7
NYMT 19 42322 4
ATRA 23 458410 1
CNST 26 303807 -9
GBX 14 39209 5
Average 18.6 157786 -1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $7 million in USAC’s case. Constellation Pharmaceuticals, Inc. (NASDAQ:CNST) is the most popular stock in this table. On the other hand BioXcel Therapeutics, Inc. (NASDAQ:BTAI) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Usa Compression Partners LP (NYSE:USAC) is even less popular than BTAI. Our overall hedge fund sentiment score for USAC is 21. 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. Hedge funds clearly dropped the ball on USAC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on USAC as the stock returned 26.3% since Q3 (through November 27th) and outperformed the market by an even larger margin.

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