How do we determine whether Energy Transfer L.P. (NYSE:ET) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Energy Transfer L.P. (NYSE:ET) investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. Our calculations also showed that ET isn’t among the 30 most popular stocks among hedge funds.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s go over the key hedge fund action encompassing Energy Transfer L.P. (NYSE:ET).
How have hedgies been trading Energy Transfer L.P. (NYSE:ET)?
At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in ET a year ago. 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, Zimmer Partners was the largest shareholder of Energy Transfer L.P. (NYSE:ET), with a stake worth $141.3 million reported as of the end of March. Trailing Zimmer Partners was Appaloosa Management LP, which amassed a stake valued at $102.9 million. Arrowstreet Capital, Magnetar Capital, and Angelo Gordon & Co were also very fond of the stock, giving the stock large weights in their portfolios.
Since Energy Transfer L.P. (NYSE:ET) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of funds who sold off their positions entirely last quarter. Intriguingly, Steve Cohen’s Point72 Asset Management sold off the largest position of all the hedgies followed by Insider Monkey, totaling close to $112.9 million in stock, and Daniel Arbess’s Perella Weinberg Partners was right behind this move, as the fund cut about $39.4 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Energy Transfer L.P. (NYSE:ET). We will take a look at Marathon Petroleum Corp (NYSE:MPC), ABB Ltd (NYSE:ABB), The Sherwin-Williams Company (NYSE:SHW), and BCE Inc. (NYSE:BCE). This group of stocks’ market caps are closest to ET’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MPC | 65 | 3263062 | -7 |
| ABB | 15 | 347062 | 2 |
| SHW | 42 | 1153461 | -8 |
| BCE | 16 | 422698 | 0 |
| Average | 34.5 | 1296571 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $1297 million. That figure was $765 million in ET’s case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 15 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. 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ET wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ET investors were disappointed as the stock returned -7.5% 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
