The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Magellan Midstream Partners, L.P. (NYSE:MMP) from the perspective of those successful funds.
MMP shareholders have witnessed a decrease in support from the world’s most successful money managers lately. There were 16 hedge funds in our database with MMP positions at the end of the previous quarter, versus 14 at the end of Q3. 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 Ameriprise Financial, Inc. (NYSE:AMP), Equifax Inc. (NYSE:EFX), and Autodesk, Inc. (NASDAQ:ADSK) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
With all of this in mind, we’re going to take a look at the key action surrounding Magellan Midstream Partners, L.P. (NYSE:MMP).
How are hedge funds trading Magellan Midstream Partners, L.P. (NYSE:MMP)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in MMP over the last 5 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, John Osterweis of Osterweis Capital Management holds the number one position in Magellan Midstream Partners, L.P. (NYSE:MMP) which has a $54.3 million position in the stock, comprising 3.3% of its 13F portfolio. On Osterweis Capital Management’s heels is Bernard Selz of Selz Capital, with a $30.7 million position; the fund has 7.2% of its 13F portfolio invested in the stock. Other professional money managers that are bullish comprise Jim Simons’ Renaissance Technologies which is one of the largest hedge funds in the world, and William Michaelcheck’s Mariner Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Due to the fact that Magellan Midstream Partners, L.P. (NYSE:MMP) has sustained declining sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of fund managers who were dropping their full holdings in the third quarter. Interestingly, Richard Driehaus’ Driehaus Capital got rid of the largest position of all the investors tracked by Insider Monkey, valued at an estimated $8.1 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dumped its call options, about $4.7 million worth.
Let’s also examine hedge fund activity in other stocks similar to Magellan Midstream Partners, L.P. (NYSE:MMP). These stocks are Ameriprise Financial, Inc. (NYSE:AMP), Equifax Inc. (NYSE:EFX), Autodesk, Inc. (NASDAQ:ADSK), and Grupo Televisa SAB (ADR) (NYSE:TV). This group of stocks’ market caps are similar to MMP’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1.77 billion. That figure was $123 million in MMP’s case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand Grupo Televisa SAB (ADR) (NYSE:TV) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Magellan Midstream Partners, L.P. (NYSE:MMP) is even less popular than TV. 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.