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 (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Cheniere Energy Partners LP (NYSE:CQP).
Is Cheniere Energy Partners LP (NYSE:CQP) a good investment today? The best stock pickers are getting more optimistic. The number of bullish hedge fund positions went up by 2 in recent months. Our calculations also showed that CQP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
T Boone Pickens of BP 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 we’re going to take a gander at the key hedge fund action encompassing Cheniere Energy Partners LP (NYSE:CQP).
What have hedge funds been doing with Cheniere Energy Partners LP (NYSE:CQP)?
At the end of the fourth quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CQP over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Covalis Capital held the most valuable stake in Cheniere Energy Partners LP (NYSE:CQP), which was worth $8.2 million at the end of the third quarter. On the second spot was Columbus Hill Capital Management which amassed $6 million worth of shares. Citadel Investment Group, Southport Management, and BP Capital 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 Southport Management allocated the biggest weight to Cheniere Energy Partners LP (NYSE:CQP), around 4.04% of its 13F portfolio. Covalis Capital is also relatively very bullish on the stock, dishing out 3.25 percent of its 13F equity portfolio to CQP.
As one would reasonably expect, key hedge funds were breaking ground themselves. Covalis Capital, managed by Zilvinas Mecelis, established the largest position in Cheniere Energy Partners LP (NYSE:CQP). Covalis Capital had $8.2 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0.6 million investment in the stock during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer’s PEAK6 Capital Management.
Let’s go over hedge fund activity in other stocks similar to Cheniere Energy Partners LP (NYSE:CQP). These stocks are Keysight Technologies Inc (NYSE:KEYS), Apollo Global Management , Inc. (NYSE:APO), New Oriental Education & Tech Group Inc. (NYSE:EDU), and Tencent Music Entertainment Group (NYSE:TME). This group of stocks’ market values match CQP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KEYS | 49 | 1019974 | -1 |
| APO | 29 | 2225310 | 5 |
| EDU | 50 | 1375166 | 12 |
| TME | 26 | 515443 | 10 |
| Average | 38.5 | 1283973 | 6.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.5 hedge funds with bullish positions and the average amount invested in these stocks was $1284 million. That figure was $19 million in CQP’s case. New Oriental Education & Tech Group Inc. (NYSE:EDU) is the most popular stock in this table. On the other hand Tencent Music Entertainment Group (NYSE:TME) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Cheniere Energy Partners LP (NYSE:CQP) is even less popular than TME. Hedge funds dodged a bullet by taking a bearish stance towards CQP. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately CQP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CQP investors were disappointed as the stock returned -34.7% during the same time period 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 so far 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.
