Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of EQT Corporation (NYSE:EQT). There is currently only one ETF with at least 4% weight in EQT: First Trust Natural Gas ETF (NYSE:FCG)
Hedge fund interest in EQT Corporation (NYSE:EQT) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Gol Linhas Aereas Inteligentes SA (NYSE:GOL), Enphase Energy Inc (NASDAQ:ENPH), and Rattler Midstream LP (NASDAQ:RTLR) to gather more data points. Our calculations also showed that EQT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Michael Lowenstein of Kensico Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the new hedge fund action surrounding EQT Corporation (NYSE:EQT).
What have hedge funds been doing with EQT Corporation (NYSE:EQT)?
At Q3’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EQT over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Kensico Capital held the most valuable stake in EQT Corporation (NYSE:EQT), which was worth $98.4 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $92 million worth of shares. Firefly Value Partners, Deep Basin Capital, and Bridgewater Associates 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 SIR Capital Management allocated the biggest weight to EQT Corporation (NYSE:EQT), around 6.48% of its portfolio. Firefly Value Partners is also relatively very bullish on the stock, designating 6.38 percent of its 13F equity portfolio to EQT.
Seeing as EQT Corporation (NYSE:EQT) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of funds who sold off their full holdings in the third quarter. At the top of the heap, David Costen Haley’s HBK Investments sold off the largest position of the “upper crust” of funds tracked by Insider Monkey, totaling close to $79.1 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also said goodbye to its stock, about $15.5 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to EQT Corporation (NYSE:EQT). We will take a look at Gol Linhas Aereas Inteligentes SA (NYSE:GOL), Enphase Energy Inc (NASDAQ:ENPH), Rattler Midstream LP (NASDAQ:RTLR), and Manchester United PLC (NYSE:MANU). This group of stocks’ market caps resemble EQT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GOL | 11 | 194286 | 3 |
| ENPH | 32 | 289899 | 12 |
| RTLR | 11 | 163347 | -9 |
| MANU | 11 | 32460 | 1 |
| Average | 16.25 | 169998 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $170 million. That figure was $442 million in EQT’s case. Enphase Energy Inc (NASDAQ:ENPH) is the most popular stock in this table. On the other hand Gol Linhas Aereas Inteligentes SA (NYSE:GOL) is the least popular one with only 11 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 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 -17.7% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
