Is Plains GP Holdings LP (PAGP) Going To Burn These Hedge Funds ?

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Plains GP Holdings LP (NYSE:PAGP) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Is Plains GP Holdings LP (NYSE:PAGP) a splendid stock to buy now? The best stock pickers are turning bullish. The number of bullish hedge fund bets improved by 1 lately. Our calculations also showed that PAGP isn’t among the 30 most popular stocks among hedge funds (view the video below).
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the fresh hedge fund action encompassing Plains GP Holdings LP (NYSE:PAGP).

What have hedge funds been doing with Plains GP Holdings LP (NYSE:PAGP)?

At the end of the second quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in PAGP a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Josh Friedman Canyon Capital

The largest stake in Plains GP Holdings LP (NYSE:PAGP) was held by Deep Basin Capital, which reported holding $111.1 million worth of stock at the end of March. It was followed by Canyon Capital Advisors with a $81.1 million position. Other investors bullish on the company included Perella Weinberg Partners, Point72 Asset Management, and Millennium Management.

As one would reasonably expect, key money managers have been driving this bullishness. Perella Weinberg Partners, created the biggest position in Plains GP Holdings LP (NYSE:PAGP). Perella Weinberg Partners had $43.4 million invested in the company at the end of the quarter. Vince Maddi and Shawn Brennan’s SIR Capital Management also made a $10.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Clint Carlson’s Carlson Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and David Harding’s Winton Capital Management.

Let’s check out hedge fund activity in other stocks similar to Plains GP Holdings LP (NYSE:PAGP). These stocks are Clean Harbors Inc (NYSE:CLH), Healthequity Inc (NASDAQ:HQY), Spark Therapeutics Inc (NASDAQ:ONCE), and Cushman & Wakefield plc (NYSE:CWK). This group of stocks’ market values match PAGP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CLH 27 413470 0
HQY 23 300902 1
ONCE 39 1284491 3
CWK 14 159437 -12
Average 25.75 539575 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $540 million. That figure was $307 million in PAGP’s case. Spark Therapeutics Inc (NASDAQ:ONCE) is the most popular stock in this table. On the other hand Cushman & Wakefield plc (NYSE:CWK) is the least popular one with only 14 bullish hedge fund positions. Plains GP Holdings LP (NYSE:PAGP) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PAGP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PAGP investors were disappointed as the stock returned -13.7% during the third 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 many of these stocks already outperformed the market so far in 2019.

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