Did The Smart Money Play Cheniere Energy, Inc. (LNG) Correctly?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Cheniere Energy, Inc. (NYSE:LNG) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Hedge fund interest in Cheniere Energy, Inc. (NYSE:LNG) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that LNG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), Expedia Group Inc (NASDAQ:EXPE), and Sirius XM Holdings Inc (NASDAQ:SIRI) to gather more data points.

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 glance at the new hedge fund action encompassing Cheniere Energy, Inc. (NYSE:LNG).

Michael Lowenstein of Kensico Capital

Do Hedge Funds Think LNG Is A Good Stock To Buy Now?

At Q3’s end, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in LNG over the last 25 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

The largest stake in Cheniere Energy, Inc. (NYSE:LNG) was held by Icahn Capital LP, which reported holding $1579.2 million worth of stock at the end of September. It was followed by Kensico Capital with a $341.2 million position. Other investors bullish on the company included MFN Partners, Steadfast Capital Management, and Slate Path Capital. In terms of the portfolio weights assigned to each position Yost Capital Management allocated the biggest weight to Cheniere Energy, Inc. (NYSE:LNG), around 16.29% of its 13F portfolio. MFN Partners is also relatively very bullish on the stock, designating 12.77 percent of its 13F equity portfolio to LNG.

Seeing as Cheniere Energy, Inc. (NYSE:LNG) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds that elected to cut their positions entirely last quarter. Intriguingly, Himanshu Gulati’s Antara Capital sold off the largest investment of the “upper crust” of funds watched by Insider Monkey, worth an estimated $17.3 million in stock. Brian J. Higgins’s fund, King Street Capital, also sold off its stock, about $17.3 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cheniere Energy, Inc. (NYSE:LNG) but similarly valued. These stocks are Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), Expedia Group Inc (NASDAQ:EXPE), Sirius XM Holdings Inc (NASDAQ:SIRI), Kansas City Southern (NYSE:KSU), Upstart Holdings, Inc. (NASDAQ:UPST), Yum China Holdings, Inc. (NYSE:YUMC), and The Hartford Financial Services Group Inc (NYSE:HIG). All of these stocks’ market caps are similar to LNG’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.4 hedge funds with bullish positions and the average amount invested in these stocks was $3241 million. That figure was $3103 million in LNG’s case. Expedia Group Inc (NASDAQ:EXPE) is the most popular stock in this table. On the other hand Upstart Holdings, Inc. (NASDAQ:UPST) is the least popular one with only 23 bullish hedge fund positions. Cheniere Energy, Inc. (NYSE:LNG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LNG is 52.3. 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 LNG as the stock returned 14.9% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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