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Hedge Funds Have Never Been This Bullish On Tellurian Inc. (TELL)

Nina Todic

Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. The S&P 500 Index ETF (SPY) lost 2.6% in the first two months of the second quarter. Ten out of 11 industry groups in the S&P 500 Index lost value in May. The average return of a randomly picked stock in the index was even worse (-3.6%). This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 20 most popular S&P 500 stocks among hedge funds not only generated positive returns but also outperformed the index by about 3 percentage points through May 30th. In this article, we will take a look at what hedge funds think about Tellurian Inc. (NASDAQ:TELL).

Is Tellurian Inc. (NASDAQ:TELL) a safe investment now? Prominent investors are betting on the stock. The number of long hedge fund positions advanced by 1 in recent months. Our calculations also showed that tell isn't among the 30 most popular stocks among hedge funds. TELL was in 16 hedge funds' portfolios at the end of March. There were 15 hedge funds in our database with TELL positions at the end of the previous quarter.

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.

Izzy Englander of MILLENNIUM MANAGEMENT

Let's analyze the key hedge fund action encompassing Tellurian Inc. (NASDAQ:TELL).

What does smart money think about Tellurian Inc. (NASDAQ:TELL)?

Heading into the second quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in TELL a year ago. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

No of Hedge Funds with TELL Positions

The largest stake in Tellurian Inc. (NASDAQ:TELL) was held by Electron Capital Partners, which reported holding $34.4 million worth of stock at the end of March. It was followed by Blackstart Capital with a $18.2 million position. Other investors bullish on the company included Point72 Asset Management, Millennium Management, and Encompass Capital Advisors.

Consequently, key hedge funds have been driving this bullishness. Granite Point Capital, managed by Warren Lammert, created the biggest call position in Tellurian Inc. (NASDAQ:TELL). Granite Point Capital had $10.1 million invested in the company at the end of the quarter. Richard Driehaus's Driehaus Capital also made a $2.6 million investment in the stock during the quarter. The other funds with brand new TELL positions are Bruce Kovner's Caxton Associates LP and Joel Greenblatt's Gotham Asset Management.

Let's go over hedge fund activity in other stocks similar to Tellurian Inc. (NASDAQ:TELL). We will take a look at National Beverage Corp. (NASDAQ:FIZZ), AppFolio Inc (NASDAQ:APPF), KBR, Inc. (NYSE:KBR), and PDC Energy Inc (NASDAQ:PDCE). This group of stocks' market valuations are closest to TELL's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FIZZ,21,248749,0 APPF,15,230629,1 KBR,20,362648,-6 PDCE,14,212661,-2 Average,17.5,263672,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $264 million. That figure was $125 million in TELL's case. National Beverage Corp. (NASDAQ:FIZZ) is the most popular stock in this table. On the other hand PDC Energy Inc (NASDAQ:PDCE) is the least popular one with only 14 bullish hedge fund positions. Tellurian Inc. (NASDAQ:TELL) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately TELL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TELL investors were disappointed as the stock returned -27.1% 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.

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