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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Cheniere Energy, Inc. (NYSE:LNG) based on those filings.
Is LNG a good stock to buy now? Cheniere Energy, Inc. (NYSE:LNG) was in 40 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 62. LNG shareholders have witnessed an increase in support from the world's most elite money managers in recent months. There were 38 hedge funds in our database with LNG positions at the end of the second quarter. Our calculations also showed that LNG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
William Harnisch of Peconic Partners LLC
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind let's take a gander at the fresh hedge fund action regarding Cheniere Energy, Inc. (NYSE:LNG).
Do Hedge Funds Think LNG Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 43 hedge funds with a bullish position in LNG a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Icahn Capital LP held the most valuable stake in Cheniere Energy, Inc. (NYSE:LNG), which was worth $931.3 million at the end of the third quarter. On the second spot was Kensico Capital which amassed $193 million worth of shares. Zimmer Partners, MFN Partners, and Steadfast Capital Management 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 MFN Partners allocated the biggest weight to Cheniere Energy, Inc. (NYSE:LNG), around 10.79% of its 13F portfolio. Freshford Capital Management is also relatively very bullish on the stock, dishing out 7.73 percent of its 13F equity portfolio to LNG.
Now, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, initiated the most valuable position in Cheniere Energy, Inc. (NYSE:LNG). Millennium Management had $31.6 million invested in the company at the end of the quarter. William Harnisch's Peconic Partners LLC also made a $7.4 million investment in the stock during the quarter. The other funds with brand new LNG positions are Steve Cohen's Point72 Asset Management, Parvinder Thiara's Athanor Capital, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Cheniere Energy, Inc. (NYSE:LNG) but similarly valued. We will take a look at KeyCorp (NYSE:KEY), United Microelectronics Corp (NYSE:UMC), ONEOK, Inc. (NYSE:OKE), Dr. Reddy's Laboratories Limited (NYSE:RDY), Dynatrace, Inc. (NYSE:DT), Evergy, Inc. (NYSE:EVRG), and Open Text Corporation (NASDAQ:OTEX). This group of stocks' market values match LNG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KEY,33,249262,-4 UMC,11,137076,0 OKE,20,239172,-5 RDY,13,208241,1 DT,46,1523927,5 EVRG,37,763391,-3 OTEX,19,160355,1 Average,25.6,468775,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $469 million. That figure was $1971 million in LNG's case. Dynatrace, Inc. (NYSE:DT) is the most popular stock in this table. On the other hand United Microelectronics Corp (NYSE:UMC) is the least popular one with only 11 bullish hedge fund positions. Cheniere Energy, Inc. (NYSE:LNG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LNG is 67.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on LNG as the stock returned 27.9% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.