Hedge Funds Are Betting On Tallgrass Energy GP LP (TEGP)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets, hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Tallgrass Energy GP LP (NYSE:TEGP).

Is Tallgrass Energy GP LP (NYSE:TEGP) a superb stock to buy now? Money managers are buying. The number of long hedge fund positions rose by 1 lately. Tallgrass Energy GP LP (NYSE:TEGP) was in 10 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with Tallgrass Energy GP LP (NYSE:TEGP) positions at the end of the previous quarter. At the end of this article, we will also compare Tallgrass Energy GP LP (NYSE:TEGP) to other stocks, including Healthcare Trust Of America Inc (NYSE:HTA), bluebird bio Inc (NASDAQ:BLUE), and Pool Corporation (NASDAQ:POOL) to get a better sense of its popularity.

To most stock holders, hedge funds are seen as underperforming, old investment tools of years past. While there are over 8000 funds with their doors open at the moment, Our experts hone in on the aristocrats of this group, about 700 funds. It is estimated that this group of investors orchestrates the bulk of all hedge funds’ total capital, and by tailing their unrivaled investments, Insider Monkey has identified a few investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, we’re going to view the new action surrounding Tallgrass Energy GP LP (NYSE:TEGP).

Hedge fund activity in Tallgrass Energy GP LP (NYSE:TEGP)

Heading into Q4, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 11% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Stuart J. Zimmer’s Zimmer Partners has the largest position in Tallgrass Energy GP LP (NYSE:TEGP), worth close to $19.6 million, amounting to 1.5% of its total 13F portfolio. Sitting at the No. 2 spot is Phill Gross and Robert Atchinson of Adage Capital Management, with a $15.9 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish comprise Ken Griffin’s Citadel Investment Group, Neil Chriss’ Hutchin Hill Capital, and Renaissance Technologies.

Consequently, key money managers have jumped into Tallgrass Energy GP LP (NYSE:TEGP) headfirst. Renaissance Technologies also made a $0.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Douglas Dunn and Vincent Soler’s Limestone Value Partners, David Costen Haley’s HBK Investments, and Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Tallgrass Energy GP LP (NYSE:TEGP) but similarly valued. These stocks are Healthcare Trust Of America Inc (NYSE:HTA), bluebird bio Inc (NASDAQ:BLUE), Pool Corporation (NASDAQ:POOL), and Veeva Systems Inc (NYSE:VEEV). This group of stocks’ market valuations are closest to TEGP’s market valuation.

As you can see, these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $56 million in Tallgrass Energy GP LP (NYSE:TEGP)’s case. bluebird bio Inc (NASDAQ:BLUE) is the most popular stock in this table. On the other hand, Healthcare Trust Of America Inc (NYSE:HTA) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks, Tallgrass Energy GP LP (NYSE:TEGP) is even less popular than Healthcare Trust Of America Inc (NYSE:HTA). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.