Here is What Hedge Funds Think About Kinder Morgan Inc (KMI)

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Kinder Morgan Inc (NYSE:KMI).

Kinder Morgan Inc (NYSE:KMI) was in 67 hedge funds’ portfolios at the end of the fourth quarter of 2015. KMI has seen a decrease in hedge fund sentiment recently. There were 72 hedge funds in our database with KMI holdings at the end of the previous quarter. At the end of this article we will also compare KMI to other stocks including Deutsche Bank AG (USA) (NYSE:DB), Twenty-First Century Fox Inc (NASDAQ:FOXA), and eBay Inc (NASDAQ:EBAY) to get a better sense of its popularity.

According to most shareholders, hedge funds are assumed to be underperforming, outdated financial vehicles of yesteryear. While there are greater than 8000 funds trading at present, We hone in on the elite of this group, about 700 funds. These money managers oversee the lion’s share of the hedge fund industry’s total capital, and by following their highest performing picks, Insider Monkey has unsheathed numerous investment strategies that have historically surpassed the market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Amid a drop in oil prices, Kinder Morgan’s stock has dropped by more than 52% over the last year. However, since the beginning of the year, the stock. However, since the beginning of the year, the shares have advanced by 25% amid Warren Buffett’s Berkshire Hathaway reporting a new position in the company as of the end of December.

The decline offered investors the chance to buy shares of the largest energy infrastructure company in the US much cheaper and even though the company slashed its dividend by 75% to $0.125 in December, many investors feel that the move was necessary as the company focuses on long-term growth rather than keeping shareholders happy in the near future.

With all of this in mind, let’s view the fresh action regarding Kinder Morgan Inc (NYSE:KMI).

How are hedge funds trading Kinder Morgan Inc (NYSE:KMI)?

At the end of the fourth quarter, a total of 67 of the hedge funds tracked by Insider Monkey were long this stock, down by 7% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the most valuable position in Kinder Morgan Inc (NYSE:KMI). Berkshire Hathaway has a $395.9 million position in the stock, comprising 0.3% of its 13F portfolio. On Berkshire Hathaway’s heels is Soroban Capital Partners, managed by Eric W. Mandelblatt, which holds a $373 million call position; the fund has 2.7% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism consist of Bob Peck and Andy Raab’s FPR Partners, D. E. Shaw’s D E Shaw and David Tepper’s Appaloosa Management LP.

Seeing as Kinder Morgan Inc (NYSE:KMI) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few money managers who sold off their entire stakes in the fourth quarter. At the top of the heap, Jody LaNasa and Vivian Lau’s Serengeti Asset Management dumped the biggest position of the “upper crust” of funds watched by Insider Monkey, totaling about $27.7 million in stock, and Leon Cooperman’s Omega Advisors was right behind this move, as the fund cut about $19.7 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Kinder Morgan Inc (NYSE:KMI) but similarly valued. We will take a look at Deutsche Bank AG (USA) (NYSE:DB), Twenty-First Century Fox Inc (NASDAQ:FOXA), eBay Inc (NASDAQ:EBAY), and Canon Inc. (ADR) (NYSE:CAJ). This group of stocks’ market valuations are similar to KMI’s market valuation.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1.63 billion. That figure was $2.31 billion in KMI’s case. eBay Inc (NASDAQ:EBAY) is the most popular stock in this table. On the other hand Canon Inc. (ADR) (NYSE:CAJ) is the least popular one with only five 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard EBAY might be a better candidate to consider a long position.