World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Kinder Morgan Inc (NYSE:KMI) was in 37 hedge funds' portfolios at the end of June. KMI has seen an increase in enthusiasm from smart money recently. There were 36 hedge funds in our database with KMI holdings at the end of the previous quarter. Our calculations also showed that KMI isn't among the 30 most popular stocks among hedge funds.
In the eyes of most shareholders, hedge funds are viewed as unimportant, old financial tools of yesteryear. While there are over 8000 funds trading at present, Our experts hone in on the masters of this group, around 750 funds. Most estimates calculate that this group of people oversee bulk of all hedge funds' total capital, and by tailing their best investments, Insider Monkey has formulated a number of investment strategies that have historically outstripped Mr. Market. Insider Monkey's flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the recent hedge fund action regarding Kinder Morgan Inc (NYSE:KMI).
What does smart money think about Kinder Morgan Inc (NYSE:KMI)?
At the end of the second quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the previous quarter. By comparison, 40 hedge funds held shares or bullish call options in KMI a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, FPR Partners held the most valuable stake in Kinder Morgan Inc (NYSE:KMI), which was worth $557.9 million at the end of the second quarter. On the second spot was First Pacific Advisors LLC which amassed $354.6 million worth of shares. Moreover, Renaissance Technologies, Abrams Capital Management, and D E Shaw were also bullish on Kinder Morgan Inc (NYSE:KMI), allocating a large percentage of their portfolios to this stock.
Consequently, key money managers were breaking ground themselves. Perella Weinberg Partners established the largest position in Kinder Morgan Inc (NYSE:KMI). Perella Weinberg Partners had $10.5 million invested in the company at the end of the quarter. Sara Nainzadeh's Centenus Global Management also made a $5.7 million investment in the stock during the quarter. The other funds with brand new KMI positions are Karim Abbadi and Edward McBride's Centiva Capital, Michael Kharitonov and Jon David McAuliffe's Voleon Capital, and Richard Driehaus's Driehaus Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Kinder Morgan Inc (NYSE:KMI) but similarly valued. We will take a look at Exelon Corporation (NASDAQ:EXC), Aon plc (NYSE:AON), Marriott International Inc (NASDAQ:MAR), and American International Group Inc (NYSE:AIG). All of these stocks' market caps match KMI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXC,32,1990186,-1 AON,34,2527721,-5 MAR,27,2521738,2 AIG,41,2270404,4 Average,33.5,2327512,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.5 hedge funds with bullish positions and the average amount invested in these stocks was $2328 million. That figure was $1686 million in KMI's case. American International Group Inc (NYSE:AIG) is the most popular stock in this table. On the other hand Marriott International Inc (NASDAQ:MAR) is the least popular one with only 27 bullish hedge fund positions. Kinder Morgan Inc (NYSE:KMI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately KMI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on KMI were disappointed as the stock returned -0.1% during the third quarter 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 many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.