How do we determine whether Suburban Propane Partners LP (NYSE:SPH) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Suburban Propane Partners LP a splendid investment today? Prominent investors are becoming less confident. The number of long hedge fund bets retreated by one in recent months. Suburban Propane Partners was in six hedge funds’ portfolios at the end of the third quarter of 2015. There were seven hedge funds in our database with Suburban Propane Partners 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 Kennametal Inc. (NYSE:KMT), Kite Realty Group Trust (NYSE:KRG), and Ellie Mae Inc (NYSE:ELLI) to gather more data points.
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In the 21st century investor’s toolkit there are many gauges investors can use to grade stocks. A duo of the most under-the-radar gauges are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the elite investment managers can beat the broader indices by a solid amount (see the details here).
Keeping this in mind, we’re going to analyze the fresh action encompassing Suburban Propane Partners LP (NYSE:SPH).
What does the smart money think about Suburban Propane Partners LP (NYSE:SPH)?
Heading into Q4, a total of six of the hedge funds tracked by Insider Monkey were long in this stock, a drop of 14% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies holds the biggest position in Suburban Propane Partners LP (NYSE:SPH). Renaissance Technologies has a $6.1 million position in the stock, comprising less than 0.1% of its 13F portfolio. On Renaissance Technologies’ heels is PEAK6 Capital Management, managed by Matthew Hulsizer, which held a $4.6 million position of call options; less than 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds that are bullish encompass George Hall’s Clinton Group, and Ken Griffin’s Citadel Investment Group.
We view hedge fund activity in the stock as being unfavorable, but in this case there was only a single hedge fund selling its entire position: Balyasny Asset Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a profitable position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case with Suburban Propane Partners because only one of the 700+ hedge funds tracked by Insider Monkey identified it as a viable investment and initiated a position in the stock (that fund was PEAK6 Capital Management).
Let’s now take a look at hedge fund activity in other stocks similar to Suburban Propane Partners LP (NYSE:SPH). We will take a look at Kennametal Inc. (NYSE:KMT), Kite Realty Group Trust (NYSE:KRG), Ellie Mae Inc (NYSE:ELLI), and Kythera Biopharmaceuticals Inc (NASDAQ:KYTH). This group of stocks’ market valuations are similar to SPH’s market valuation.
|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 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $322 million. When it comes to Suburban Propane Partners , that figure was just $20 million, which is a big red flag. Ellie Mae Inc (NYSE:ELLI) is the most popular stock in this table. On the other hand Kite Realty Group Trust (NYSE:KRG) is the least popular one with only seven bullish hedge fund positions. Compared to these stocks Suburban Propane Partners LP (NYSE:SPH) is even less popular than Kite Realty. Taking it all into account, it may be a good idea to analyze Suburban Propane Partners in detail and understand why the smart money isn’t betting on 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.