Is Phillips 66 Partners LP (PSXP) Going to Burn These Hedge Funds?

Hedge funds may not always be right, even collectively, but data shows that their consensus long positions have historically outperformed broader market benchmarks. For example, the Goldman Sachs’ VIP list, which includes the 50 stocks that appear the most often among hedge funds’ top-10 largest holdings, has beaten the S&P 500 gauge on a quarterly basis 64% of the time since 2001, including last year, when it delivered impressive 23% returns in a flat market. Meanwhile, Goldman Sachs’ list of the 20 ‘Most Concentrated’ stocks, which hedge funds own the highest percentage of in terms of the stock’s float, has gained 18% this year to the S&P 500’s 8% gains. Clearly, it’s worthwhile to pay attention to what hedge funds are buying, so let’s check out the latest 13F filing data to see what they think about Phillips 66 Partners LP (NYSE:PSXP) .

Is Phillips 66 Partners LP (NYSE:PSXP) worth your attention right now? Hedge funds are surely turning bullish. The number of bullish hedge fund bets that are revealed through the 13F filings improved by 3 in recent months. PSXP was in 8 hedge funds’ portfolios at the end of the third quarter of 2016. There were 5 hedge funds in our database with PSXP positions at the end of the previous quarter. 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 Casey’s General Stores, Inc. (NASDAQ:CASY), Antero Midstream Partners LP (NYSE:AM), and Valvoline Inc (NYSE:VVV) 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 glance at the new action regarding Phillips 66 Partners LP (NYSE:PSXP).

How have hedgies been trading Phillips 66 Partners LP (NYSE:PSXP)?

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, growth of 60% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PSXP over the last 5 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Zimmer Partners, led by Stuart J. Zimmer, holds the biggest position in Phillips 66 Partners LP (NYSE:PSXP). Zimmer Partners has a $20.5 million position in the stock, comprising 0.6% of its 13F portfolio. The second most bullish fund manager is Alec Litowitz and Ross Laser of Magnetar Capital, with a $14.6 million position; 0.2% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions consist of George Hall’s Clinton Group, and Richard Driehaus’ Driehaus Capital. We should note that Zimmer Partners is 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.

As industrywide interest jumped, some big names were leading the bulls’ herd. George Hall’s Clinton Group initiated a $1.6 million position during the quarter. The other funds with new positions in the stock are Driehaus Capital, Renaissance Technologies, one of the largest hedge funds in the world, and Israel Englander’s Millennium Management.

Let’s now review hedge fund activity in other stocks similar to Phillips 66 Partners LP (NYSE:PSXP). We will take a look at Casey’s General Stores, Inc. (NASDAQ:CASY), Antero Midstream Partners LP (NYSE:AM), Valvoline Inc (NYSE:VVV), and Booz Allen Hamilton Holding Corporation (NYSE:BAH). This group of stocks’ market values are closest to PSXP’s market value.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $265 million. That figure was $42 million in PSXP’s case. Valvoline Inc (NYSE:VVV) is the most popular stock in this table. On the other hand Antero Midstream Partners LP (NYSE:AM) is the least popular one with only 5 bullish hedge fund positions. Phillips 66 Partners LP (NYSE:PSXP) 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. In this regard VVV might be a better candidate to consider taking a long position in.

Disclosure: None