8. EQT Corporation (NYSE:EQT)
Value of Appaloosa Management’s 13F Position (9/30/2024): $65.8 million
Number of Hedge Fund Shareholders (9/30/2024): 47
Appaloosa trimmed its stake in EQT Corporation (NYSE:EQT) by 6% during the third quarter, as it did with both of the energy stocks above, ending September with just under 1.8 million shares. The fund added EQT to its portfolio in the final quarter of 2020. Numerous other funds made big additions to their EQT holdings during Q3, including Steve Cohen’s Point72 Asset Management and Ken Griffin’s Citadel Investment Group.
Analysts were impressed with EQT Corporation (NYSE:EQT)’s strong earnings beat in Q3, when the natural gas producer earned $0.12 per share on an adjusted basis, double what estimates were projecting. The company also grew revenue by 7.6% year-over-year to $1.28 billion despite a challenging commodity price environment. EQT’s rapid integration of Equitrans Midstream, which it acquired in July 2024, also drew plaudits, with EQT reporting that it had achieved over 60% integration by the end of Q3. UBS and Piper Sandler both raised their price targets on EQT by $2 following the company’s Q3 earnings report, to $42 and $34 respectively.
Legacy Ridge Capital Management discussed why it would take a stake in EQT Corporation (NYSE:EQT) following its merger with Equitrans in the fund’s Q2 2024 investor letter:
“In addition to Vistra’s performance compelling us to reorder the top of the portfolio, two other positions had news warranting brief updates: Summit Midstream Partners (SMLP) continues restructuring the business and balance sheet, and Equitrans Midstream (ETRN) is getting acquired by EQT Corporation (NYSE:EQT).
Lastly, we wrote about Equitrans Midstream (ETRN) in the 2023 mid-year letter, primarily discussing that company’s long and expensive journey completing the Mountain Valley Pipeline and the short-term opportunity we took advantage of. After all the hand wringing and stress with respect to that one project the whole business will end up right where it started, as part of EQT Corp. (EQT). In March, EQT announced they are acquiring each ETRN share for .3504 EQT shares. The transaction should close within the next several weeks.
EQT is the top natural gas producer in the United States with a dominant position in the Appalachian Basin and will become one of the lowest cost gas producers in the US, if not the lowest, after consummating this merger. Our fund is going to exchange the ETRN shares and become EQT owners. The investment checks important boxes for us: 1) a disciplined management team focused on tangible value creation; 2) an ability to generate significant FCF that gets returned to shareholders; 3) exposure to a commodity with strong secular demand trends, which gives us a call-option on higher prices. At only 5% of our assets it will start as a small position for us, but with natural gas prices volatile and back in the low-$2’s we should have ample opportunity to exploit the volatility over time and hopefully make it bigger.”
