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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Kinder Morgan Inc (NYSE:KMI) in this article.
Is KMI a good stock to buy? Kinder Morgan Inc (NYSE:KMI) investors should be aware of a decrease in activity from the world's largest hedge funds in recent months. Kinder Morgan Inc (NYSE:KMI) was in 38 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 72. There were 42 hedge funds in our database with KMI positions at the end of the fourth quarter. Our calculations also showed that KMI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Andrew Raab of FPR Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery 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. 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 homepage. Now we're going to review the fresh hedge fund action surrounding Kinder Morgan Inc (NYSE:KMI).
Do Hedge Funds Think KMI Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KMI over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, FPR Partners held the most valuable stake in Kinder Morgan Inc (NYSE:KMI), which was worth $328.5 million at the end of the fourth quarter. On the second spot was Abrams Capital Management which amassed $207.7 million worth of shares. First Pacific Advisors LLC, Two Sigma Advisors, and Arrowstreet Capital 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 FPR Partners allocated the biggest weight to Kinder Morgan Inc (NYSE:KMI), around 9.01% of its 13F portfolio. Quaker Capital Investments is also relatively very bullish on the stock, dishing out 6.16 percent of its 13F equity portfolio to KMI.
Judging by the fact that Kinder Morgan Inc (NYSE:KMI) has experienced declining sentiment from the smart money, we can see that there were a few money managers who were dropping their positions entirely by the end of the first quarter. It's worth mentioning that David Tepper's Appaloosa Management LP dumped the largest stake of the 750 funds tracked by Insider Monkey, valued at an estimated $8.1 million in stock. Richard SchimeláandáLawrence Sapanski's fund, Cinctive Capital Management, also said goodbye to its stock, about $5.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds by the end of the first quarter.
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. These stocks are General Mills, Inc. (NYSE:GIS), Simon Property Group, Inc (NYSE:SPG), Aptiv PLC (NYSE:APTV), Centene Corporation (NYSE:CNC), IQVIA Holdings, Inc. (NYSE:IQV), CRH PLC (NYSE:CRH), and Mizuho Financial Group Inc. (NYSE:MFG). All of these stocks' market caps are closest to KMI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GIS,31,797434,-8 SPG,31,506264,-1 APTV,50,1417793,6 CNC,53,2696678,-3 IQV,62,3683858,-7 CRH,9,165990,2 MFG,5,15835,0 Average,34.4,1326265,-1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.4 hedge funds with bullish positions and the average amount invested in these stocks was $1326 million. That figure was $1194 million in KMI's case. IQVIA Holdings, Inc. (NYSE:IQV) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 5 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 45.8. 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 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on KMI, though not to the same extent, as the stock returned 11.6% since Q1 (through June 25th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.