We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in EQT Corporation (NYSE:EQT)? The smart money sentiment can provide an answer to this question.
EQT Corporation (NYSE:EQT) investors should be aware of a decrease in activity from the world’s largest hedge funds of late. EQT was in 29 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 36 hedge funds in our database with EQT positions at the end of the previous quarter. Our calculations also showed that EQT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are tons of gauges stock market investors have at their disposal to evaluate their holdings. Some of the most under-the-radar gauges are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the top investment managers can outclass the market by a superb amount (see the details here).
Michael Lowenstein of Kensico Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the new hedge fund action surrounding EQT Corporation (NYSE:EQT).
How have hedgies been trading EQT Corporation (NYSE:EQT)?
At the end of the fourth quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in EQT over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Kensico Capital was the largest shareholder of EQT Corporation (NYSE:EQT), with a stake worth $84.7 million reported as of the end of September. Trailing Kensico Capital was Slate Path Capital, which amassed a stake valued at $54.2 million. Firefly Value Partners, D E Shaw, and SIR Capital 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 Firefly Value Partners allocated the biggest weight to EQT Corporation (NYSE:EQT), around 7.07% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, designating 6.47 percent of its 13F equity portfolio to EQT.
Since EQT Corporation (NYSE:EQT) has faced a decline in interest from hedge fund managers, it’s easy to see that there exists a select few funds that decided to sell off their entire stakes in the third quarter. At the top of the heap, Ray Dalio’s Bridgewater Associates dropped the biggest investment of all the hedgies monitored by Insider Monkey, valued at about $26.9 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund said goodbye to about $19 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 7 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to EQT Corporation (NYSE:EQT). These stocks are Emergent Biosolutions Inc (NYSE:EBS), Brandywine Realty Trust (NYSE:BDN), SINA Corp (NASDAQ:SINA), and Rapid7 Inc (NASDAQ:RPD). This group of stocks’ market caps are similar to EQT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EBS | 12 | 122641 | -7 |
| BDN | 18 | 99587 | -1 |
| SINA | 18 | 168492 | -2 |
| RPD | 23 | 228346 | -5 |
| Average | 17.75 | 154767 | -3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $368 million in EQT’s case. Rapid7 Inc (NASDAQ:RPD) is the most popular stock in this table. On the other hand Emergent Biosolutions Inc (NYSE:EBS) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks EQT Corporation (NYSE:EQT) is more popular among hedge funds. 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 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately EQT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EQT were disappointed as the stock returned -28.7% during the first two and a half months of 2020 (through March 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
