We recently published a list of large-cap stocks American politicians are buying. Energy Transfer LP Unit (NYSE:ET) ranks higher in the list of the top large-cap stocks American Senators and Congress members are buying. That’s why the stock deserves a deeper look.
Over the past several months markets have been fretting over the concentration of returns phenomenon where just a handful of stocks are responsible for the broader market gains. While 2024 is seeing bifurcation of these gains to other segments of the market, including pick-and-shovel AI stocks, small-cap companies and defensive equities, the fact remains that large-cap stocks with strong balance sheets are still attractive in the current volatile environment. Russell 1000 Growth Index, which tracks the top large- and mid-cap stocks in the US, returned 43% in 2023. In 2024 it’s up about 9% through May 9, compared to SPY’s 10% gain.
While it’s true that large-cap tech stocks like Nvidia and Apple have failed to perform as expected in the first quarter of 2024, it’s also a market reality that the large-cap universe offers immense opportunities for investors, and market gains keep rotating within this space. Investment management funds, ETFs, institutional investors as well as retail investors have all been pouring money into large-cap stocks in search of stability, dividends, AI-led stock price gains and other opportunities. Talking about the returns of its large-cap fund, Weitz Investment Management said in its Q1 report that Meta Platforms, Inc. (META), Berkshire Hathaway, Inc. (BRK/B), Amazon and MasterCard were among its top contributors.
Finding Cheap Stocks in the Current Environment
Investing in large-cap stocks doesn’t always mean you put your money into overvalued, buzzing stocks which everyone is talking about. There are still some undervalued plays in the market. For example, our research recently unlocked a few cheap AI plays better than NVDA. If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Coming back to the buzzing stocks, JPMorgan Large Cap Leaders Strategy outperformed the S&P 500 index in the first quarter of 2024 as it returned about 12.8% in the quarter, compared to SPY’s 10.5% gain. The strategy’s returns got a boost from IT and consumer discretionary stocks, while they took a hit from detractors like Tesla, UnitedHealth and Consumer Staples segment. The Strategy invests in “attractively valued” large-cap stocks with earnings growth, strong management teams and business models.
While small-cap stocks offer strong growth potential in the long-term, investors are flocking to large-cap stocks amid as a higher-for-longer interest rate scenario realizes. When interest rates are high and volatility is rising, small-cap stocks do not perform well. The small cap-heavy Russell 2000 index is up just 3% year to date compared to the Russell 1000 index. Smaller companies are sensitive to interest rates. According to Goldman Sachs, about a third of the Russell 2000 debt is at a floating rate, compared with 6% for the S&P 500, the Wall Street Journal reported.
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For this article we analyzed the top large-cap stocks American Senators and Congress members bought over the past few months. Why are we interested in the stocks that hedge funds and insiders pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Energy Transfer LP Unit (NYSE:ET)
Number of Hedge Fund Investors: 34
Energy Transfer LP Unit (NYSE:ET) ranks 8th in our list of the top large-cap stocks American politicians are buying. On April 30, Congresswoman Virginia Foxx bought a stake in Energy Transfer LP Unit (NYSE:ET) worth anywhere between $1,000 to $15,000. Since this transaction the energy stock has gained about 2.5%. As of the end of the fourth quarter of 2023, 34 hedge funds tracked by Insider Monkey had stakes in Energy Transfer LP Unit (NYSE:ET).
Silver Beech Capital made the following regarding Energy Transfer LP (NYSE:ET) in its fourth quarter 2023 investor letter:
Energy Transfer LP (NYSE:ET) owns and operates the largest and most balanced collection of energy infrastructure assets in the United States. ET’s assets include 125,000 miles of oil and natural gas pipelines, export facilities on both the Gulf Coast and East Coast, and more than 1 million barrels per day of natural gas liquid fractionation capacity. ET accounts for 20% of worldwide natural gas liquid exports. Further, ET is uniquely connected to every major hydrocarbon basin in the United States.
By assembling energy infrastructure to gather, process, transport, and store hydrocarbons, ET connects exploration and production companies (“E&Ps”) with downstream end users such as gas stations, utilities, and export facilities. As an end-to-end midstream solution, ET enables its customers to focus on their portion of the value chain without the burden of significant but essential midstream logistics. ET’s services thus add tremendous value to all constituents of the energy marketplace.
Though natural gas is a relatively clean source of fuel, restrictive federal and state regulations and other permissions severely restrict the building of natural gas pipelines and other infrastructure in North America that would help facilitate abundant hydrocarbon production. Pipelines are by far the cheapest and greenest method of transporting hydrocarbons; pipelines reduce emissions from truck transport and reduce congestion on highways, rail, and shipping routes…” (Click here to read the full text)
Energy Transfer LP Unit (NYSE:ET) ranks 8th in our list of the large-cap stocks American politicians are buying.
If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.