Smart money investors make mistakes sometimes. Some of their top consensus picks, such as Valeant and SunEdison, have not done well during the last 12 months due to various reasons. Nevertheless, the data show their consensus picks have done well on average. The top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters. S&P 500 Index returned only 7.6% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds and billionaire investors think before doing extensive research on a stock. In this article, we will take a closer look at Western Gas Equity Partners LP (NYSE:WGP) from the perspective of those smart money investors.
So, is Western Gas Equity Partners LP (NYSE:WGP) worth your attention right now? Investors who are in the know are betting on the stock. The number of long hedge fund bets increased by one to nine during the third quarter, but 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 IMS Health Holdings Inc (NYSE:IMS), Atmos Energy Corporation (NYSE:ATO), and IDEXX Laboratories, Inc. (NASDAQ:IDXX) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Now, let’s take a glance at the fresh action regarding Western Gas Equity Partners LP (NYSE:WGP).
How are hedge funds trading Western Gas Equity Partners LP (NYSE:WGP)?
As stated at the beginning of this article, there were nine investors tracked by Insider Monkey long Western Gas Equity Partners, up by 13% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Stuart J. Zimmer’s Zimmer Partners has the most valuable position in Western Gas Equity Partners LP (NYSE:WGP), worth close to $35 million, corresponding to 0.9% of its total 13F portfolio. Coming in second is Highland Capital Management, led by James Dondero, which holds a $18 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism contain Jim Simons’ Renaissance Technologies and Russell Lucas’s Lucas Capital Management.
Now, specific money managers have been driving this bullishness. Millennium Management, led by Israel Englander, assembled the biggest position in Western Gas Equity Partners LP (NYSE:WGP). Millennium Management had $4.5 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $4.2 million investment in the stock during the quarter. The following funds were also among the new WGP investors: Matthew Hulsizer’s PEAK6 Capital Management and Ken Griffin’s Citadel Investment Group.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Western Gas Equity Partners LP (NYSE:WGP) but similarly valued. These stocks are IMS Health Holdings Inc (NYSE:IMS), Atmos Energy Corporation (NYSE:ATO), IDEXX Laboratories, Inc. (NASDAQ:IDXX), and The Cooper Companies, Inc. (NYSE:COO). This group of stocks’ market valuations resemble WGP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IMS | 19 | 1230209 | -2 |
| ATO | 12 | 188280 | -1 |
| IDXX | 24 | 740430 | 4 |
| COO | 26 | 329471 | 5 |
As you can see these stocks had an average of 20 funds with long positions and the average amount invested in these stocks was $622 million. That figure was just $81 million in WGP’s case. The Cooper Companies, Inc. (NYSE:COO) is the most popular stock in this table. On the other hand Atmos Energy Corporation (NYSE:ATO) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Western Gas Equity Partners LP (NYSE:WGP) is even less popular than Atmos Energy Corporation (NYSE:ATO). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
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