Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Black Stone Minerals LP (NYSE:BSM) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds’ portfolios at the end of September. At the end of this article we will also compare BSM to other stocks including Sensient Technologies Corporation (NYSE:SXT), Olin Corporation (NYSE:OLN), and Cameco Corporation (USA) (NYSE:CCJ) to get a better sense of its popularity.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
How have hedgies been trading Black Stone Minerals LP (NYSE:BSM)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the second quarter of 2016. On the other hand, there were a total of 4 hedge funds with a bullish position in BSM at the beginning of this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Hawkins Capital, led by Russell Hawkins, holds the largest position in Black Stone Minerals LP (NYSE:BSM). Hawkins Capital has a $9.2 million position in the stock, comprising 3% of its 13F portfolio. The second most bullish fund is Renaissance Technologies, one of the largest hedge funds in the world, holding a $5.8 million position. Remaining professional money managers that hold long positions consist of Russell Lucas’ Lucas Capital Management, Carson Yost’s Yost Capital Management and Drew Cupps’ Cupps Capital Management. We should note that Yost Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually got rid of their positions entirely. Interestingly, Daniel S. Och’s OZ Management got rid of the biggest stake of all the investors followed by Insider Monkey, totaling about $9.5 million in stock, and George Hall’s Clinton Group was right behind this move, as the fund dumped about $0.5 million worth of shares.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Black Stone Minerals LP (NYSE:BSM) but similarly valued. We will take a look at Sensient Technologies Corporation (NYSE:SXT), Olin Corporation (NYSE:OLN), Cameco Corporation (USA) (NYSE:CCJ), and Cavium Inc (NASDAQ:CAVM). This group of stocks’ market caps are similar to BSM’s market cap.
[table]
Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position
SXT,16,175833,7
OLN,18,989434,-10
CCJ,17,199724,-2
CAVM,24,346930,4
[/table]
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $428 million. That figure was $21 million in BSM’s case. Cavium Inc (NASDAQ:CAVM) is the most popular stock in this table. On the other hand Sensient Technologies Corporation (NYSE:SXT) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Black Stone Minerals LP (NYSE:BSM) is even less popular than SXT. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind 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.
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Disclosure: None
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