With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was KNOT Offshore Partners LP (NYSE:KNOP).
Is KNOT Offshore Partners LP (NYSE:KNOP) going to take off soon? Hedge funds were in a pessimistic mood. The number of bullish hedge fund bets retreated by 2 lately. KNOT Offshore Partners LP (NYSE:KNOP) was in 3 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 6. Our calculations also showed that KNOP isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 5 hedge funds in our database with KNOP positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
CITADEL INVESTMENT GROUP
Ken Griffin of Citadel Investment Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let's take a gander at the fresh hedge fund action surrounding KNOT Offshore Partners LP (NYSE:KNOP).
What have hedge funds been doing with KNOT Offshore Partners LP (NYSE:KNOP)?
Heading into the fourth quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -40% from the previous quarter. By comparison, 3 hedge funds held shares or bullish call options in KNOP a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Is KNOP A Good Stock To Buy?
Among these funds, Renaissance Technologies held the most valuable stake in KNOT Offshore Partners LP (NYSE:KNOP), which was worth $15 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $5.1 million worth of shares. McKinley Capital Management was 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 McKinley Capital Management allocated the biggest weight to KNOT Offshore Partners LP (NYSE:KNOP), around 0.05% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to KNOP.
Because KNOT Offshore Partners LP (NYSE:KNOP) has faced falling interest from the entirety of the hedge funds we track, it's safe to say that there is a sect of funds who were dropping their full holdings in the third quarter. At the top of the heap, Ken Griffin's Citadel Investment Group dumped the biggest position of the 750 funds watched by Insider Monkey, worth an estimated $0.3 million in stock, and Frederick DiSanto's Ancora Advisors was right behind this move, as the fund dumped about $0 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as KNOT Offshore Partners LP (NYSE:KNOP) but similarly valued. These stocks are D8 Holdings Corp. (NYSE:DEH), Kala Pharmaceuticals, Inc. (NASDAQ:KALA), Univest Financial Corporation (NASDAQ:UVSP), Progenity, Inc. (NASDAQ:PROG), Triple-S Management Corp.(NYSE:GTS), First Mid Bancshares, Inc. (NASDAQ:FMBH), and American Public Education, Inc. (NASDAQ:APEI). This group of stocks' market values are closest to KNOP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DEH,20,121167,20 KALA,18,142580,-1 UVSP,11,49515,-1 PROG,7,6786,-3 GTS,11,87709,1 FMBH,3,2962,0 APEI,12,75333,-4 Average,11.7,69436,1.7 [/table]
As you can see these stocks had an average of 11.7 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $21 million in KNOP's case. D8 Holdings Corp. (NYSE:DEH) is the most popular stock in this table. On the other hand First Mid Bancshares, Inc. (NASDAQ:FMBH) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks KNOT Offshore Partners LP (NYSE:KNOP) is even less popular than FMBH. Our overall hedge fund sentiment score for KNOP is 18. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on KNOP as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on KNOP as the stock returned 16.5% since Q3 (through November 23rd) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
