Is Enterprise Products Partners L.P. (NYSE:EPD) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Enterprise Products Partners L.P. (NYSE:EPD) investors should be aware of a decrease in enthusiasm from smart money lately. EPD was in 20 hedge funds’ portfolios at the end of the first quarter of 2019. There were 25 hedge funds in our database with EPD positions at the end of the previous quarter. Our calculations also showed that epd isn’t among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a gander at the new hedge fund action regarding Enterprise Products Partners L.P. (NYSE:EPD).
How have hedgies been trading Enterprise Products Partners L.P. (NYSE:EPD)?
At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EPD over the last 15 quarters. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in Enterprise Products Partners L.P. (NYSE:EPD) was held by Zimmer Partners, which reported holding $136.6 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $70.3 million position. Other investors bullish on the company included Wexford Capital, Osterweis Capital Management, and Arosa Capital Management.
Because Enterprise Products Partners L.P. (NYSE:EPD) has experienced declining sentiment from the smart money, it’s safe to say that there was a specific group of fund managers that elected to cut their positions entirely in the third quarter. Interestingly, Daniel Arbess’s Perella Weinberg Partners dumped the biggest investment of the 700 funds watched by Insider Monkey, valued at about $33 million in stock. Kelly Hampaul’s fund, Everett Capital Advisors, also sold off its stock, about $10.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 5 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Enterprise Products Partners L.P. (NYSE:EPD) but similarly valued. These stocks are Westpac Banking Corporation (NYSE:WBK), Takeda Pharmaceutical Company Limited (NYSE:TAK), Dominion Energy, Inc. (NYSE:D), and CIGNA Corporation (NYSE:CI). All of these stocks’ market caps resemble EPD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WBK | 6 | 33572 | -4 |
| TAK | 35 | 1711503 | 25 |
| D | 36 | 973129 | -1 |
| CI | 47 | 3021107 | -21 |
| Average | 31 | 1434828 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1435 million. That figure was $352 million in EPD’s case. CIGNA Corporation (NYSE:CI) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 6 bullish hedge fund positions. Enterprise Products Partners L.P. (NYSE:EPD) 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 EPD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EPD investors were disappointed as the stock returned -2.8% 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.
