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Were Hedge Funds Right About Dumping Natural Resource Partners LP (NRP) ?

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Natural Resource Partners LP (NYSE:NRP) makes for a good investment right now.

Natural Resource Partners LP (NYSE:NRP) investors should pay attention to a decrease in hedge fund interest in recent months. NRP was in 4 hedge funds’ portfolios at the end of December. There were 5 hedge funds in our database with NRP positions at the end of the previous quarter. Our calculations also showed that NRP isn’t among the 30 most popular stocks among hedge funds.

In the eyes of most investors, hedge funds are seen as underperforming, old investment vehicles of yesteryear. While there are greater than 8000 funds with their doors open at present, Our researchers hone in on the moguls of this club, around 750 funds. Most estimates calculate that this group of people watch over most of all hedge funds’ total capital, and by keeping track of their best picks, Insider Monkey has come up with a few investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

Steven Tananbaum - GoldenTree Asset Management

We’re going to take a gander at the latest hedge fund action encompassing Natural Resource Partners LP (NYSE:NRP).

Hedge fund activity in Natural Resource Partners LP (NYSE:NRP)

Heading into the first quarter of 2019, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NRP over the last 14 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

NRP_may2019

Among these funds, GoldenTree Asset Management held the most valuable stake in Natural Resource Partners LP (NYSE:NRP), which was worth $5.1 million at the end of the fourth quarter. On the second spot was Marshall Wace LLP which amassed $2.7 million worth of shares. Moreover, Citadel Investment Group, Renaissance Technologies, and PEAK6 Capital Management were also bullish on Natural Resource Partners LP (NYSE:NRP), allocating a large percentage of their portfolios to this stock.

Because Natural Resource Partners LP (NYSE:NRP) has faced bearish sentiment from the smart money, we can see that there lies a certain “tier” of money managers that elected to cut their positions entirely last quarter. At the top of the heap, Miguel Fidalgo’s Triarii Capital sold off the largest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $0.7 million in stock. Ken Griffin’s fund, Citadel Investment Group, also sold off its stock, about $0.4 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Natural Resource Partners LP (NYSE:NRP) but similarly valued. These stocks are American Public Education, Inc. (NASDAQ:APEI), Ethan Allen Interiors Inc. (NYSE:ETH), Luxfer Holdings PLC (NYSE:LXFR), and Insteel Industries Inc (NASDAQ:IIIN). This group of stocks’ market caps resemble NRP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APEI 16 76944 3
ETH 15 58548 3
LXFR 12 78785 4
IIIN 12 58512 -4
Average 13.75 68197 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $8 million in NRP’s case. American Public Education, Inc. (NASDAQ:APEI) is the most popular stock in this table. On the other hand Luxfer Holdings PLC (NYSE:LXFR) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Natural Resource Partners LP (NYSE:NRP) is even less popular than LXFR. Hedge funds dodged a bullet by taking a bearish stance towards NRP. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately NRP wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); NRP investors were disappointed as the stock returned 11.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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