We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Kinder Morgan Inc (NYSE:KMI) and determine whether hedge funds skillfully traded this stock.
Kinder Morgan Inc (NYSE:KMI) shareholders have witnessed an increase in hedge fund sentiment recently. Kinder Morgan Inc (NYSE:KMI) was in 43 hedge funds’ portfolios at the end of September. The all time high for this statistic is 72. Our calculations also showed that KMI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
David Abrams of Abrams Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a look at the fresh hedge fund action regarding Kinder Morgan Inc (NYSE:KMI).
Do Hedge Funds Think KMI Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KMI over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, FPR Partners was the largest shareholder of Kinder Morgan Inc (NYSE:KMI), with a stake worth $330.1 million reported as of the end of September. Trailing FPR Partners was Abrams Capital Management, which amassed a stake valued at $208.7 million. First Pacific Advisors LLC, D E Shaw, 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 FPR Partners allocated the biggest weight to Kinder Morgan Inc (NYSE:KMI), around 8.76% of its 13F portfolio. Abrams Capital Management is also relatively very bullish on the stock, dishing out 4.55 percent of its 13F equity portfolio to KMI.
As one would reasonably expect, key money managers were leading the bulls’ herd. TwinBeech Capital, managed by Jinghua Yan, initiated the biggest position in Kinder Morgan Inc (NYSE:KMI). TwinBeech Capital had $17.1 million invested in the company at the end of the quarter. Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management also initiated a $11.1 million position during the quarter. The following funds were also among the new KMI investors: Sander Gerber’s Hudson Bay Capital Management, Greg Eisner’s Engineers Gate Manager, and William B. Gray’s Orbis Investment Management.
Let’s now review hedge fund activity in other stocks similar to Kinder Morgan Inc (NYSE:KMI). We will take a look at The Allstate Corporation (NYSE:ALL), DiDi Global Inc. (NYSE:DIDI), Manulife Financial Corporation (NYSE:MFC), Xilinx, Inc. (NASDAQ:XLNX), Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), Banco Bradesco SA (NYSE:BBD), and Nutrien Ltd. (NYSE:NTR). This group of stocks’ market valuations match KMI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALL | 27 | 821166 | -6 |
| DIDI | 15 | 701653 | 15 |
| MFC | 18 | 351002 | 0 |
| XLNX | 62 | 4541236 | 3 |
| ERIC | 21 | 227446 | 2 |
| BBD | 13 | 228299 | -5 |
| NTR | 30 | 853049 | 2 |
| Average | 26.6 | 1103407 | 1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $1103 million. That figure was $1012 million in KMI’s case. Xilinx, Inc. (NASDAQ:XLNX) is the most popular stock in this table. On the other hand Banco Bradesco SA (NYSE:BBD) is the least popular one with only 13 bullish hedge fund positions. Kinder Morgan Inc (NYSE:KMI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KMI is 58.5. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on KMI as the stock returned 7.1% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Kinder Morgan Inc. (NYSE:KMI)
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Disclosure: None. This article was originally published at Insider Monkey.
