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Here is What Hedge Funds Think About Kinder Morgan Inc (KMI)

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·5 min read
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  • KMI

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Kinder Morgan Inc (NYSE:KMI) to find out whether there were any major changes in hedge funds' views.

Kinder Morgan Inc (NYSE:KMI) investors should be aware of an increase in support from the world's most elite money managers lately. Kinder Morgan Inc (NYSE:KMI) was in 43 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 72. Our calculations also showed that KMI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

David Abrams
David Abrams

David Abrams of Abrams Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we're going to take a peek at the latest hedge fund action regarding Kinder Morgan Inc (NYSE:KMI).

Do Hedge Funds Think KMI Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the second quarter of 2021. By comparison, 46 hedge funds held shares or bullish call options in KMI a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is KMI A Good Stock To Buy?
Is KMI A Good Stock To Buy?

Of the funds tracked by Insider Monkey, FPR Partners, managed by Bob Peck and Andy Raab, holds the number one position in Kinder Morgan Inc (NYSE:KMI). FPR Partners has a $330.1 million position in the stock, comprising 8.8% of its 13F portfolio. Sitting at the No. 2 spot is Abrams Capital Management, managed by David Abrams, which holds a $208.7 million position; 4.6% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish include Robert Rodriguez and Steven Romick's First Pacific Advisors LLC, D. E. Shaw's D E Shaw and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position FPR Partners allocated the biggest weight to Kinder Morgan Inc (NYSE:KMI), around 8.76% of its 13F portfolio. Abrams Capital Management is also relatively very bullish on the stock, earmarking 4.55 percent of its 13F equity portfolio to KMI.

As one would reasonably expect, specific money managers have been driving this bullishness. TwinBeech Capital, managed by Jinghua Yan, established the most valuable position in Kinder Morgan Inc (NYSE:KMI). TwinBeech Capital had $17.1 million invested in the company at the end of the quarter. Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management also initiated a $11.1 million position during the quarter. The other funds with new positions in the stock are Sander Gerber's Hudson Bay Capital Management, Greg Eisner's Engineers Gate Manager, and William B. Gray's Orbis Investment Management.

Let's now review hedge fund activity in other stocks similar to Kinder Morgan Inc (NYSE:KMI). We will take a look at The Allstate Corporation (NYSE:ALL), DiDi Global Inc. (NYSE:DIDI), Manulife Financial Corporation (NYSE:MFC), Xilinx, Inc. (NASDAQ:XLNX), Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), Banco Bradesco SA (NYSE:BBD), and Nutrien Ltd. (NYSE:NTR). This group of stocks' market valuations are similar to KMI's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALL,27,821166,-6 DIDI,15,701653,15 MFC,18,351002,0 XLNX,62,4541236,3 ERIC,21,227446,2 BBD,13,228299,-5 NTR,30,853049,2 Average,26.6,1103407,1.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $1103 million. That figure was $1012 million in KMI's case. Xilinx, Inc. (NASDAQ:XLNX) is the most popular stock in this table. On the other hand Banco Bradesco SA (NYSE:BBD) is the least popular one with only 13 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. Our overall hedge fund sentiment score for KMI is 58.5. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately KMI wasn't nearly as popular as these 5 stocks and hedge funds that were betting on KMI were disappointed as the stock returned -6.1% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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