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USD Partners LP (USDP): Hedge Funds In Wait-and-See Mode

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 8 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of USD Partners LP (NYSE:USDP).

Hedge fund interest in USD Partners LP (NYSE:USDP) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Allot Ltd. (NASDAQ:ALLT), IDT Corporation (NYSE:IDT), and Territorial Bancorp Inc (NASDAQ:TBNK) to gather more data points. Our calculations also showed that USDP isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

RENAISSANCE TECHNOLOGIES

Jim Simons of RENAISSANCE TECHNOLOGIES

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the recent hedge fund action regarding USD Partners LP (NYSE:USDP).

Hedge fund activity in USD Partners LP (NYSE:USDP)

At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in USDP over the last 17 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.

USDP_nov2019

The largest stake in USD Partners LP (NYSE:USDP) was held by Arrowstreet Capital, which reported holding $2.3 million worth of stock at the end of September. It was followed by EJF Capital with a $0.8 million position. The only other hedge fund that is bullish on the company was Renaissance Technologies.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as USD Partners LP (NYSE:USDP) but similarly valued. These stocks are Allot Ltd. (NASDAQ:ALLT), IDT Corporation (NYSE:IDT), Territorial Bancorp Inc (NASDAQ:TBNK), and Advanced Emissions Solutions, Inc. (NASDAQ:ADES). All of these stocks’ market caps match USDP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALLT 9 64237 1
IDT 11 39665 -2
TBNK 4 23620 0
ADES 8 42100 0
Average 8 42406 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $3 million in USDP’s case. IDT Corporation (NYSE:IDT) is the most popular stock in this table. On the other hand Territorial Bancorp Inc (NASDAQ:TBNK) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks USD Partners LP (NYSE:USDP) is even less popular than TBNK. Hedge funds dodged a bullet by taking a bearish stance towards USDP. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately USDP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); USDP investors were disappointed as the stock returned -4.8% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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