While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Equitrans Midstream Corporation (NYSE:ETRN).
Is Equitrans Midstream Corporation (NYSE:ETRN) ready to rally soon? Prominent investors were taking a bullish view. The number of bullish hedge fund bets increased by 3 lately. Equitrans Midstream Corporation (NYSE:ETRN) was in 28 hedge funds’ portfolios at the end of March. The all time high for this statistic is 29. Our calculations also showed that ETRN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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Michael Lowenstein of Kensico Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s view the fresh hedge fund action encompassing Equitrans Midstream Corporation (NYSE:ETRN).
Do Hedge Funds Think ETRN Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ETRN over the last 23 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Zimmer Partners was the largest shareholder of Equitrans Midstream Corporation (NYSE:ETRN), with a stake worth $87.6 million reported as of the end of March. Trailing Zimmer Partners was Third Point, which amassed a stake valued at $73.4 million. Kensico Capital, AQR Capital Management, and Scopia 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 Scopia Capital allocated the biggest weight to Equitrans Midstream Corporation (NYSE:ETRN), around 3.2% of its 13F portfolio. Knighthead Capital is also relatively very bullish on the stock, setting aside 1.26 percent of its 13F equity portfolio to ETRN.
Now, some big names were leading the bulls’ herd. Renaissance Technologies, established the most valuable position in Equitrans Midstream Corporation (NYSE:ETRN). Renaissance Technologies had $4 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $3.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Mark Coe’s Intrinsic Edge Capital, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Mika Toikka’s AlphaCrest Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Equitrans Midstream Corporation (NYSE:ETRN) but similarly valued. These stocks are Applied Industrial Technologies Inc (NYSE:AIT), Diodes Incorporated (NASDAQ:DIOD), SPS Commerce, Inc. (NASDAQ:SPSC), Bed Bath & Beyond Inc. (NASDAQ:BBBY), Cronos Group Inc. (NASDAQ:CRON), Ambarella Inc (NASDAQ:AMBA), and Dana Incorporated (NYSE:DAN). This group of stocks’ market valuations are closest to ETRN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AIT | 21 | 67909 | 0 |
| DIOD | 21 | 161053 | 7 |
| SPSC | 20 | 133241 | 6 |
| BBBY | 23 | 314226 | -10 |
| CRON | 10 | 126181 | -1 |
| AMBA | 35 | 286944 | -1 |
| DAN | 26 | 545924 | -2 |
| Average | 22.3 | 233640 | -0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $362 million in ETRN’s case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand Cronos Group Inc. (NASDAQ:CRON) is the least popular one with only 10 bullish hedge fund positions. Equitrans Midstream Corporation (NYSE:ETRN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ETRN is 73. 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. 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 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on ETRN, though not to the same extent, as the stock returned 10.3% since Q1 (through July 9th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
