Were Hedge Funds Right About Hess Midstream Partners (HESM)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Hess Midstream Partners LP (NYSE:HESM) based on that data.

Hess Midstream Partners LP (NYSE:HESM) was in 9 hedge funds’ portfolios at the end of the fourth quarter of 2019. HESM shareholders have witnessed an increase in hedge fund interest recently. There were 8 hedge funds in our database with HESM positions at the end of the previous quarter. Our calculations also showed that HESM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Steven Cohen of Point72 Asset Management

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the fresh hedge fund action surrounding Hess Midstream Partners LP (NYSE:HESM).

What have hedge funds been doing with Hess Midstream Partners LP (NYSE:HESM)?

At the end of the fourth quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the third quarter of 2019. On the other hand, there were a total of 6 hedge funds with a bullish position in HESM a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is HESM A Good Stock To Buy?

Among these funds, Arrowstreet Capital held the most valuable stake in Hess Midstream Partners LP (NYSE:HESM), which was worth $4.5 million at the end of the third quarter. On the second spot was Marshall Wace LLP which amassed $2.9 million worth of shares. Heronetta Management, Renaissance Technologies, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Heronetta Management allocated the biggest weight to Hess Midstream Partners LP (NYSE:HESM), around 1.27% of its 13F portfolio. Lucas Capital Management is also relatively very bullish on the stock, dishing out 0.48 percent of its 13F equity portfolio to HESM.

Consequently, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, established the most outsized position in Hess Midstream Partners LP (NYSE:HESM). Millennium Management had $0.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $0.3 million position during the quarter.

Let’s check out hedge fund activity in other stocks similar to Hess Midstream Partners LP (NYSE:HESM). These stocks are Knoll Inc (NYSE:KNL), Raven Industries, Inc. (NASDAQ:RAVN), Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY), and NGM Biopharmaceuticals, Inc. (NASDAQ:NGM). This group of stocks’ market valuations are similar to HESM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KNL 19 63212 4
RAVN 13 103902 1
PLAY 19 237066 0
NGM 7 48026 -2
Average 14.5 113052 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $13 million in HESM’s case. Knoll Inc (NYSE:KNL) is the most popular stock in this table. On the other hand NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) is the least popular one with only 7 bullish hedge fund positions. Hess Midstream Partners LP (NYSE:HESM) 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately HESM wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); HESM investors were disappointed as the stock returned -27.7% during the same time period 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.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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