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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Cheniere Energy, Inc. (NYSE:LNG).
Cheniere Energy, Inc. (NYSE:LNG) investors should pay attention to an increase in support from the world's most elite money managers in recent months. Cheniere Energy, Inc. (NYSE:LNG) was in 40 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 62. There were 38 hedge funds in our database with LNG holdings at the end of December. Our calculations also showed that LNG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the eyes of most shareholders, hedge funds are assumed to be slow, old investment vehicles of the past. While there are over 8000 funds in operation at present, We hone in on the bigwigs of this group, around 850 funds. These hedge fund managers oversee bulk of the smart money's total capital, and by observing their matchless picks, Insider Monkey has revealed various investment strategies that have historically exceeded Mr. Market. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Michael Lowenstein of Kensico Capital
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. Keeping this in mind let's take a glance at the recent hedge fund action surrounding Cheniere Energy, Inc. (NYSE:LNG).
Do Hedge Funds Think LNG Is A Good Stock To Buy Now?
At the end of the first quarter, 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. By comparison, 39 hedge funds held shares or bullish call options in LNG a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in Cheniere Energy, Inc. (NYSE:LNG) was held by Icahn Capital LP, which reported holding $1164.3 million worth of stock at the end of December. It was followed by Steadfast Capital Management with a $342.3 million position. Other investors bullish on the company included Kensico Capital, MFN Partners, and Slate Path Capital. In terms of the portfolio weights assigned to each position MFN Partners allocated the biggest weight to Cheniere Energy, Inc. (NYSE:LNG), around 15.24% of its 13F portfolio. Freshford Capital Management is also relatively very bullish on the stock, dishing out 10.93 percent of its 13F equity portfolio to LNG.
Now, key hedge funds have been driving this bullishness. Point State Capital, managed by Zach Schreiber, created the most outsized position in Cheniere Energy, Inc. (NYSE:LNG). Point State Capital had $57.8 million invested in the company at the end of the quarter. Brian J. Higgins's King Street Capital also initiated a $43.2 million position during the quarter. The other funds with brand new LNG positions are Ed Bosek's BeaconLight Capital, Renaissance Technologies, and Dmitry Balyasny's Balyasny Asset Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Cheniere Energy, Inc. (NYSE:LNG) but similarly valued. These stocks are Amcor plc (NYSE:AMCR), Caesars Entertainment Inc. (NASDAQ:CZR), Affirm Holdings, Inc. (NASDAQ:AFRM), Expeditors International of Washington (NASDAQ:EXPD), Rogers Communications Inc. (NYSE:RCI), Invitation Homes Inc. (NYSE:INVH), and SS&C Technologies Holdings, Inc. (NASDAQ:SSNC). This group of stocks' market values resemble LNG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMCR,17,226541,-2 CZR,76,1520267,5 AFRM,32,582516,32 EXPD,21,440396,-4 RCI,18,289168,3 INVH,28,1174443,1 SSNC,54,2671021,5 Average,35.1,986336,5.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.1 hedge funds with bullish positions and the average amount invested in these stocks was $986 million. That figure was $2550 million in LNG's case. Caesars Entertainment Inc. (NASDAQ:CZR) is the most popular stock in this table. On the other hand Amcor plc (NYSE:AMCR) is the least popular one with only 17 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 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 LNG as the stock returned 21.4% since the end of Q1 (through 6/25) 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.