Is Energy Transfer L.P. (ET) A Good Stock To Buy?

We at Insider Monkey have gone over 867 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Energy Transfer L.P. (NYSE:ET) based on that data.

Is ET a good stock to buy? Hedge fund interest in Energy Transfer L.P. (NYSE:ET) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ET isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). 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 ONEOK, Inc. (NYSE:OKE), Generac Holdings Inc. (NYSE:GNRC), and Consolidated Edison, Inc. (NYSE:ED) to gather more data points.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a peek at the latest hedge fund action regarding Energy Transfer L.P. (NYSE:ET).

John Zaro of Bourgeon Capital

Do Hedge Funds Think ET Is A Good Stock To Buy Now?

At third quarter’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2021. By comparison, 31 hedge funds held shares or bullish call options in ET a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, David Abrams’s Abrams Capital Management has the most valuable position in Energy Transfer L.P. (NYSE:ET), worth close to $212 million, accounting for 4.6% of its total 13F portfolio. The second most bullish fund manager is Appaloosa Management LP, managed by David Tepper, which holds a $96.8 million position; 2.3% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism consist of Bill Miller’s Miller Value Partners, Leon Cooperman’s Omega Advisors and Stuart J. Zimmer’s Zimmer Partners. In terms of the portfolio weights assigned to each position Heronetta Management allocated the biggest weight to Energy Transfer L.P. (NYSE:ET), around 7.2% of its 13F portfolio. Abrams Capital Management is also relatively very bullish on the stock, dishing out 4.62 percent of its 13F equity portfolio to ET.

Seeing as Energy Transfer L.P. (NYSE:ET) has experienced falling interest from the smart money, it’s easy to see that there were a few hedgies who were dropping their full holdings by the end of the third quarter. It’s worth mentioning that Himanshu Gulati’s Antara Capital dumped the biggest position of the 750 funds tracked by Insider Monkey, totaling close to $10.6 million in stock. Mark Coe’s fund, Intrinsic Edge Capital, also sold off its stock, about $3.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Energy Transfer L.P. (NYSE:ET) but similarly valued. These stocks are ONEOK, Inc. (NYSE:OKE), Generac Holdings Inc. (NYSE:GNRC), Consolidated Edison, Inc. (NYSE:ED), Albemarle Corporation (NYSE:ALB), ViacomCBS Inc. (NASDAQ:VIAC), Canon Inc. (NYSE:CAJ), and Carvana Co. (NYSE:CVNA). All of these stocks’ market caps resemble ET’s market cap.

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As you can see these stocks had an average of 35.6 hedge funds with bullish positions and the average amount invested in these stocks was $1594 million. That figure was $728 million in ET’s case. ViacomCBS Inc. (NASDAQ:VIAC) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 8 bullish hedge fund positions. Energy Transfer L.P. (NYSE:ET) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ET is 47.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately ET wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ET investors were disappointed as the stock returned -10.7% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.