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 have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Black Stone Minerals LP (NYSE:BSM) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is Black Stone Minerals LP (NYSE:BSM) a splendid investment today? Investors who are in the know were cutting their exposure. The number of bullish hedge fund positions went down by 1 in recent months. Black Stone Minerals LP (NYSE:BSM) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 8. Our calculations also showed that BSM 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. With all of this in mind we’re going to analyze the latest hedge fund action regarding Black Stone Minerals LP (NYSE:BSM).
What does smart money think about Black Stone Minerals LP (NYSE:BSM)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BSM over the last 21 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.
When looking at the institutional investors followed by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the biggest position in Black Stone Minerals LP (NYSE:BSM). Arrowstreet Capital has a $3.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Carson Yost of Yost Capital Management, with a $2.1 million position; 1.8% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish contain Murray Stahl’s Horizon Asset Management, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position Yost Capital Management allocated the biggest weight to Black Stone Minerals LP (NYSE:BSM), around 1.83% of its 13F portfolio. Horizon Asset Management is also relatively very bullish on the stock, earmarking 0.05 percent of its 13F equity portfolio to BSM.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified BSM as a viable investment and initiated a position in the stock.
Let’s go over hedge fund activity in other stocks similar to Black Stone Minerals LP (NYSE:BSM). We will take a look at The RealReal, Inc. (NASDAQ:REAL), Myovant Sciences Ltd. (NYSE:MYOV), Silvercorp Metals Inc. (NYSE:SVM), Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), Avaya Holdings Corp. (NYSE:AVYA), The Cheesecake Factory Incorporated (NASDAQ:CAKE), and Kadant Inc. (NYSE:KAI). This group of stocks’ market caps are similar to BSM’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 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $172 million. That figure was $7 million in BSM’s case. Avaya Holdings Corp. (NYSE:AVYA) is the most popular stock in this table. On the other hand Silvercorp Metals Inc. (NYSE:SVM) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Black Stone Minerals LP (NYSE:BSM) is even less popular than SVM. Our overall hedge fund sentiment score for BSM is 19. 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 BSM 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 BSM as the stock returned 22.1% 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.