Is NuStar Energy (NS) A Buy Right Now?

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was NuStar Energy L.P. (NYSE:NS).

Is NuStar Energy L.P. (NYSE:NS) a buy right now? Investors who are in the know were in a pessimistic mood. The number of bullish hedge fund positions fell by 1 recently. NuStar Energy L.P. (NYSE:NS) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 11. Our calculations also showed that NS 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.

Today there are dozens of tools stock market investors use to grade their stock investments. A pair of the most under-the-radar tools are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outperform the S&P 500 by a superb amount (see the details here).

Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

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 15 best blue chip stocks 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. Now we’re going to take a look at the key hedge fund action surrounding NuStar Energy L.P. (NYSE:NS).

What have hedge funds been doing with NuStar Energy L.P. (NYSE:NS)?

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 -20% from the second quarter of 2020. By comparison, 3 hedge funds held shares or bullish call options in NS a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the biggest position in NuStar Energy L.P. (NYSE:NS). Arrowstreet Capital has a $4.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Stuart J. Zimmer of Zimmer Partners, with a $3.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions include Ken Griffin’s Citadel Investment Group, Henry Breck’s Heronetta Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Heronetta Management allocated the biggest weight to NuStar Energy L.P. (NYSE:NS), around 0.19% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, dishing out 0.06 percent of its 13F equity portfolio to NS.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: PEAK6 Capital Management. 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 NS as a viable investment and initiated a position in the stock.

Let’s go over hedge fund activity in other stocks similar to NuStar Energy L.P. (NYSE:NS). These stocks are ICF International Inc (NASDAQ:ICFI), EnPro Industries, Inc. (NYSE:NPO), BEST Inc. (NYSE:BEST), Herc Holdings Inc. (NYSE:HRI), Infinera Corp. (NASDAQ:INFN), Annexon, Inc. (NASDAQ:ANNX), and EnLink Midstream LLC (NYSE:ENLC). This group of stocks’ market values are closest to NS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ICFI 12 32049 1
NPO 18 144888 1
BEST 8 13537 2
HRI 19 440444 -2
INFN 20 261249 -1
ANNX 11 323562 11
ENLC 9 12533 2
Average 13.9 175466 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $175 million. That figure was $8 million in NS’s case. Infinera Corp. (NASDAQ:INFN) is the most popular stock in this table. On the other hand BEST Inc. (NYSE:BEST) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks NuStar Energy L.P. (NYSE:NS) is even less popular than BEST. Our overall hedge fund sentiment score for NS is 14.9. 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 NS 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 NS as the stock returned 37.5% 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.