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Here’s What Hedge Funds Think About Cheniere Energy, Inc. (LNG)

Reymerlyn Martin

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Cheniere Energy, Inc. (NYSEAMEX:LNG).

Cheniere Energy, Inc. (NYSEAMEX:LNG) was in 53 hedge funds' portfolios at the end of the first quarter of 2019. LNG shareholders have witnessed an increase in enthusiasm from smart money in recent months. There were 46 hedge funds in our database with LNG holdings at the end of the previous quarter. Our calculations also showed that LNG isn't among the 30 most popular stocks among hedge funds.

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.

Scott Bessent of Key Square Capital Management

Let's take a look at the fresh hedge fund action surrounding Cheniere Energy, Inc. (NYSEAMEX:LNG).

How are hedge funds trading Cheniere Energy, Inc. (NYSEAMEX:LNG)?

At Q1's end, a total of 53 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards LNG over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

LNG_jun2019

Among these funds, Icahn Capital LP held the most valuable stake in Cheniere Energy, Inc. (NYSEAMEX:LNG), which was worth $1502.6 million at the end of the first quarter. On the second spot was Baupost Group which amassed $862.6 million worth of shares. Moreover, Kensico Capital, Anchorage Advisors, and Steadfast Capital Management were also bullish on Cheniere Energy, Inc. (NYSEAMEX:LNG), allocating a large percentage of their portfolios to this stock.

As one would reasonably expect, key money managers have been driving this bullishness. Duquesne Capital, managed by Stanley Druckenmiller, initiated the biggest position in Cheniere Energy, Inc. (NYSEAMEX:LNG). Duquesne Capital had $41.8 million invested in the company at the end of the quarter. Scott Bessent's Key Square Capital Management also initiated a $38.8 million position during the quarter. The other funds with new positions in the stock are Louis Bacon's Moore Global Investments, Andrew Sandler's Sandler Capital Management, and Brian Olson, Baehyun Sung, and Jamie Waters's Blackstart Capital.

Let's also examine hedge fund activity in other stocks similar to Cheniere Energy, Inc. (NYSEAMEX:LNG). These stocks are Shinhan Financial Group Co., Ltd. (NYSE:SHG), Grifols SA (NASDAQ:GRFS), Smith & Nephew plc (NYSE:SNN), and Church & Dwight Co., Inc. (NYSE:CHD). This group of stocks' market values are closest to LNG's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SHG,4,11258,-3 GRFS,14,267276,0 SNN,13,274777,2 CHD,24,338436,-6 Average,13.75,222937,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $223 million. That figure was $5188 million in LNG's case. Church & Dwight Co., Inc. (NYSE:CHD) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Cheniere Energy, Inc. (NYSEAMEX:LNG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately LNG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on LNG were disappointed as the stock returned -7.8% during the same 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 in Q2.

Disclosure: None. This article was originally published at Insider Monkey.

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