The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Tallgrass Energy, LP (NYSE:TGE) based on those filings.
Tallgrass Energy, LP (NYSE:TGE) was in 20 hedge funds’ portfolios at the end of the third quarter of 2019. TGE has experienced an increase in enthusiasm from smart money in recent months. There were 13 hedge funds in our database with TGE positions at the end of the previous quarter. Our calculations also showed that TGE 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the new hedge fund action encompassing Tallgrass Energy, LP (NYSE:TGE).
How are hedge funds trading Tallgrass Energy, LP (NYSE:TGE)?
Heading into the fourth quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 54% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TGE over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, TIG Advisors was the largest shareholder of Tallgrass Energy, LP (NYSE:TGE), with a stake worth $69.7 million reported as of the end of September. Trailing TIG Advisors was Alpine Associates, which amassed a stake valued at $65.8 million. GLG Partners, Zimmer Partners, and Halcyon Asset 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 Covalis Capital allocated the biggest weight to Tallgrass Energy, LP (NYSE:TGE), around 6.62% of its 13F portfolio. TIG Advisors is also relatively very bullish on the stock, dishing out 3.2 percent of its 13F equity portfolio to TGE.
As aggregate interest increased, specific money managers have been driving this bullishness. TIG Advisors, managed by Carl Tiedemann and Michael Tiedemann, established the most outsized position in Tallgrass Energy, LP (NYSE:TGE). TIG Advisors had $69.7 million invested in the company at the end of the quarter. Robert Emil Zoellner’s Alpine Associates also made a $65.8 million investment in the stock during the quarter. The following funds were also among the new TGE investors: John Bader’s Halcyon Asset Management, Paul Marshall and Ian Wace’s Marshall Wace, and Zilvinas Mecelis’s Covalis Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tallgrass Energy, LP (NYSE:TGE) but similarly valued. These stocks are Allison Transmission Holdings Inc (NYSE:ALSN), Grupo Televisa SAB (NYSE:TV), The Scotts Miracle-Gro Company (NYSE:SMG), and Harley-Davidson, Inc. (NYSE:HOG). This group of stocks’ market caps are similar to TGE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALSN | 28 | 883019 | 3 |
| TV | 14 | 826232 | -4 |
| SMG | 30 | 413760 | 6 |
| HOG | 18 | 20463 | 4 |
| Average | 22.5 | 535869 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $536 million. That figure was $206 million in TGE’s case. The Scotts Miracle-Gro Company (NYSE:SMG) is the most popular stock in this table. On the other hand Grupo Televisa SAB (NYSE:TV) is the least popular one with only 14 bullish hedge fund positions. Tallgrass Energy, LP (NYSE:TGE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 TGE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TGE investors were disappointed as the stock returned -8.4% 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.
