It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day.
The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Rice Midstream Partners LP(NYSE:RMP).
Is Rice Midstream Partners LP(NYSE:RMP) a good stock to buy now? The best stock pickers are surely getting more optimistic. The number of bullish hedge fund bets increased by 3 recently. There were 4 hedge funds in our database with RMP holdings 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 Cott Corporation (USA) (NYSE:COT), Allegheny Technologies Incorporated (NYSE:ATI), and International Bancshares Corp (NASDAQ:IBOC) to gather more data points.
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Keeping this in mind, let’s analyze the latest action regarding Rice Midstream Partners LP(NYSE:RMP).
How have hedgies been trading Rice Midstream Partners LP(NYSE:RMP)?
Heading into the fourth quarter of 2016, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 75% from the second quarter of 2016. By comparison, 2 hedge funds held shares or bullish call options in RMP heading into this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Magnetar Capital, led by Alec Litowitz and Ross Laser, holds the biggest position in Rice Midstream Partners LP(NYSE:RMP). Magnetar Capital has a $78.7 million position in the stock, comprising 1.2% of its 13F portfolio. The second most bullish fund manager is Stuart J. Zimmer of Zimmer Partners, with a $36 million position; 1% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish encompass Renaissance Technologies, one of the largest hedge funds in the world, Paul Marshall and Ian Wace’s Marshall Wace LLP and T Boone Pickens’s BP Capital. We should note that two of these hedge funds (Zimmer Partners and BP Capital) 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.
As one would reasonably expect, specific money managers have been driving this bullishness. Marshall Wace LLP, led by Paul Marshall and Ian Wace, created the biggest position in Rice Midstream Partners LP(NYSE:RMP). Marshall Wace LLP had $2.8 million invested in the company at the end of the quarter. T Boone Pickens’s BP Capital also made a $1.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management and Richard Driehaus’s Driehaus Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Rice Midstream Partners LP(NYSE:RMP) but similarly valued. We will take a look at Cott Corporation (USA) (NYSE:COT), Allegheny Technologies Incorporated (NYSE:ATI), International Bancshares Corp (NASDAQ:IBOC), and SolarCity Corp (NASDAQ:SCTY). All of these stocks’ market caps are similar to RMP’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 16 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $125 million in RMP’s case. Cott Corporation (USA) (NYSE:COT) is the most popular stock in this table. On the other hand International Bancshares Corp (NASDAQ:IBOC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Rice Midstream Partners LP(NYSE:RMP) is even less popular than IBOC. 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.