Is Shell Midstream Partners LP (SHLX) Going to Burn These Hedge Funds?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Shell Midstream Partners LP (NYSE:SHLX), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Shell Midstream Partners LP (NYSE:SHLX) investors should pay attention to a decrease in enthusiasm from smart money lately. Shell Midstream Partners LP (NYSE:SHLX) was in 4 hedge funds’ portfolios at the end of March. The all time high for this statistic is 13. There were 7 hedge funds in our database with SHLX holdings at the end of December. Our calculations also showed that SHLX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

If you’d ask most investors, hedge funds are seen as worthless, old financial vehicles of yesteryear. While there are greater than 8000 funds trading at present, We hone in on the leaders of this club, about 850 funds. It is estimated that this group of investors handle bulk of all hedge funds’ total asset base, and by monitoring their highest performing equity investments, Insider Monkey has discovered many investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a gander at the key hedge fund action encompassing Shell Midstream Partners LP (NYSE:SHLX).

Do Hedge Funds Think SHLX Is A Good Stock To Buy Now?

At the end of March, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -43% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SHLX over the last 23 quarters. So, let’s check out 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, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in Shell Midstream Partners LP (NYSE:SHLX), worth close to $15 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by Zimmer Partners, led by Stuart J. Zimmer, holding a $8.7 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish include Brian Gaines’s Springhouse Capital Management, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Springhouse Capital Management allocated the biggest weight to Shell Midstream Partners LP (NYSE:SHLX), around 2.15% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, dishing out 0.12 percent of its 13F equity portfolio to SHLX.

Since Shell Midstream Partners LP (NYSE:SHLX) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of funds that slashed their positions entirely heading into Q2. At the top of the heap, Ryan Caldwell’s Chiron Investment Management said goodbye to the biggest investment of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $13 million in stock. Russell Lucas’s fund, Lucas Capital Management, also sold off its stock, about $0.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds heading into Q2.

Let’s now review hedge fund activity in other stocks similar to Shell Midstream Partners LP (NYSE:SHLX). These stocks are Daqo New Energy Corp (NYSE:DQ), The Howard Hughes Corporation (NYSE:HHC), Herbalife Nutrition Ltd. (NYSE:HLF), Bank OZK (NASDAQ:OZK), Kemper Corporation (NYSE:KMPR), Oscar Health, Inc. (NYSE:OSCR), and EQT Corporation (NYSE:EQT). This group of stocks’ market valuations are similar to SHLX’s market valuation.

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As you can see these stocks had an average of 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $828 million. That figure was $27 million in SHLX’s case. Herbalife Nutrition Ltd. (NYSE:HLF) is the most popular stock in this table. On the other hand Kemper Corporation (NYSE:KMPR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Shell Midstream Partners LP (NYSE:SHLX) is even less popular than KMPR. Our overall hedge fund sentiment score for SHLX is 11.2. 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 SHLX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on SHLX as the stock returned 22.9% since Q1 (through June 11th) and outperformed the market by an even larger margin.

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