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Kimbell Royalty Partners (KRP): Hedge Funds In Wait-and-See Mode

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Kimbell Royalty Partners (NYSE:KRP).

Hedge fund interest in Kimbell Royalty Partners (NYSE:KRP) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare KRP to other stocks including AngioDynamics, Inc. (NASDAQ:ANGO), INMODE LTD. (NASDAQ:INMD), and Adecoagro SA (NYSE:AGRO) to get a better sense of its popularity.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

MOORE GLOBAL INVESTMENTS

Louis Bacon Moore of Moore Capital

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to view the fresh hedge fund action regarding Kimbell Royalty Partners (NYSE:KRP).

What does smart money think about Kimbell Royalty Partners (NYSE:KRP)?

At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in KRP over the last 17 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Among these funds, Nokomis Capital held the most valuable stake in Kimbell Royalty Partners (NYSE:KRP), which was worth $5.9 million at the end of the third quarter. On the second spot was Soros Fund Management which amassed $4.7 million worth of shares. Horizon Asset Management, Moore Global Investments, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Nokomis Capital allocated the biggest weight to Kimbell Royalty Partners (NYSE:KRP), around 1.28% of its 13F portfolio. Soros Fund Management is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to KRP.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Kimbell Royalty Partners (NYSE:KRP) but similarly valued. We will take a look at AngioDynamics, Inc. (NASDAQ:ANGO), INMODE LTD. (NASDAQ:INMD), Adecoagro SA (NYSE:AGRO), and Mesoblast Limited (NASDAQ:MESO). This group of stocks’ market values resemble KRP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ANGO 15 34646 3
INMD 7 24136 7
AGRO 16 152604 4
MESO 2 576 1
Average 10 52991 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $15 million in KRP’s case. Adecoagro SA (NYSE:AGRO) is the most popular stock in this table. On the other hand Mesoblast Limited (NASDAQ:MESO) is the least popular one with only 2 bullish hedge fund positions. Kimbell Royalty Partners (NYSE:KRP) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately KRP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KRP investors were disappointed as the stock returned 0.9% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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