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Should You Buy Capital Product Partners L.P. (CPLP)?

In this article we will check out the progression of hedge fund sentiment towards Capital Product Partners L.P. (NASDAQ:CPLP) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Capital Product Partners L.P. (NASDAQ:CPLP) a buy right now? Prominent investors are turning bullish. The number of bullish hedge fund positions advanced by 1 in recent months. Our calculations also showed that CPLP isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

At the moment there are plenty of formulas investors have at their disposal to size up publicly traded companies. A pair of the less known formulas are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the top money managers can trounce their index-focused peers by a superb amount (see the details here).

Howard Marks OAKTREE CAPITAL MANAGEMENT

Howard Marks of Oaktree Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/dissed by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the key hedge fund action surrounding Capital Product Partners L.P. (NASDAQ:CPLP).

How are hedge funds trading Capital Product Partners L.P. (NASDAQ:CPLP)?

At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CPLP over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the largest position in Capital Product Partners L.P. (NASDAQ:CPLP), worth close to $1.5 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is John Overdeck and David Siegel of Two Sigma Advisors, with a $0.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions consist of Howard Marks’s Oaktree Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP. In terms of the portfolio weights assigned to each position Oaktree Capital Management allocated the biggest weight to Capital Product Partners L.P. (NASDAQ:CPLP), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.0043 percent of its 13F equity portfolio to CPLP.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the biggest position in Capital Product Partners L.P. (NASDAQ:CPLP). Marshall Wace LLP had $0.1 million invested in the company at the end of the quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Capital Product Partners L.P. (NASDAQ:CPLP) but similarly valued. These stocks are Paratek Pharmaceuticals Inc (NASDAQ:PRTK), Prudential Bancorp, Inc. (NASDAQ:PBIP), Energy Fuels Inc (NYSE:UUUU), and Permian Basin Royalty Trust (NYSE:PBT). This group of stocks’ market values are closest to CPLP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRTK 11 10949 -2
PBIP 4 25625 0
UUUU 5 1354 1
PBT 3 1194 -4
Average 5.75 9781 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $2 million in CPLP’s case. Paratek Pharmaceuticals Inc (NASDAQ:PRTK) is the most popular stock in this table. On the other hand Permian Basin Royalty Trust (NYSE:PBT) is the least popular one with only 3 bullish hedge fund positions. Capital Product Partners L.P. (NASDAQ:CPLP) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately CPLP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CPLP investors were disappointed as the stock returned 15.5% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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