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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Cheniere Energy, Inc. (NYSE:LNG).
Is LNG stock a buy or sell? Investors who are in the know were in a pessimistic mood. The number of long hedge fund positions fell by 2 lately. Cheniere Energy, Inc. (NYSE:LNG) was in 38 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 62. Our calculations also showed that LNG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 40 hedge funds in our database with LNG holdings at the end of September.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Carl Icahn of Icahn Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 website. With all of this in mind let's analyze the fresh hedge fund action surrounding Cheniere Energy, Inc. (NYSE:LNG).
Do Hedge Funds Think LNG Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. By comparison, 43 hedge funds held shares or bullish call options in LNG 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.
Among these funds, Icahn Capital LP held the most valuable stake in Cheniere Energy, Inc. (NYSE:LNG), which was worth $970.6 million at the end of the fourth quarter. On the second spot was Steadfast Capital Management which amassed $308 million worth of shares. Kensico Capital, MFN Partners, and Holocene Advisors 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 MFN Partners allocated the biggest weight to Cheniere Energy, Inc. (NYSE:LNG), around 15.1% of its 13F portfolio. Freshford Capital Management is also relatively very bullish on the stock, dishing out 10.09 percent of its 13F equity portfolio to LNG.
Because Cheniere Energy, Inc. (NYSE:LNG) has experienced falling interest from the smart money, it's safe to say that there is a sect of fund managers that decided to sell off their positions entirely in the fourth quarter. Interestingly, Brian J. Higgins's King Street Capital said goodbye to the biggest stake of all the hedgies watched by Insider Monkey, worth close to $69.4 million in stock. Charles Lemonides's fund, Valueworks LLC, also sold off its stock, about $5.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds in the fourth quarter.
Let's now take a look at hedge fund activity in other stocks similar to Cheniere Energy, Inc. (NYSE:LNG). These stocks are Domino's Pizza, Inc. (NYSE:DPZ), Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), Suzano S.A. (NYSE:SUZ), IDEX Corporation (NYSE:IEX), Extra Space Storage, Inc. (NYSE:EXR), Leidos Holdings Inc (NYSE:LDOS), and Pool Corporation (NASDAQ:POOL). This group of stocks' market valuations match LNG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DPZ,37,1222281,2 ALNY,39,756924,4 SUZ,6,48722,2 IEX,29,738242,3 EXR,29,298792,2 LDOS,14,92699,-11 POOL,33,870840,-3 Average,26.7,575500,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $576 million. That figure was $2280 million in LNG's case. Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) is the most popular stock in this table. On the other hand Suzano S.A. (NYSE:SUZ) is the least popular one with only 6 bullish hedge fund positions. Cheniere Energy, Inc. (NYSE:LNG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LNG is 69.9. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on LNG as the stock returned 18.7% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.