In May, billionaire Steve Cohen’s SAC Capital Advisors filed its 13F with the SEC, disclosing many of its long equity positions in U.S. stocks as of the end of Q1 2013. Even though the information in 13Fs is a bit old by the time it is released, we think there are still a few ways to make use of it. For one, we’ve found that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year, and think that more strategies are possible as well. We also like to go through filings from top managers to see what big changes they are making in their portfolios. SAC, it turns out, more than tripled the size of its position in energy company and utility EQT Corporation (NYSE:EQT) during Q1 to a total of 4.3 million shares, making it the fund’s largest single-stock 13F holding by market value (see more of Cohen’s stock picks).
The $12 billion market cap EQT Corporation (NYSE:EQT) produces natural gas, natural gas liquids, and oil in the Appalachian Basin; gathers and processes natural gas; and distributes gas to customers in the Appalachian region. The company’s most recent 10-Q shows a fairly even split in operating income among these three segments. Upstream and midstream activities provide 37% of operating income each, with downstream accounting for 26%. Significant improvement in operating income occurred in all three segments in the first quarter of 2013 versus a year earlier, with earnings rising by 52%.
Still, even if we annualize earnings per share figures from Q1 we get a fairly high P/E multiple (of 31), so markets have already accounted for significant future growth. Wall Street analysts are expecting continued growth, with the result being a forward P/E of 26. In other words, SAC would seem to be expecting EQT Corporation (NYSE:EQT) to outperform expectations going forward; it’s possible, for example, that Cohen and his team see the integrated natural gas-focused company as a pure-play investment in higher nat gas prices. Billionaire George Soros reported a position of 3.1 million shares in EQT as of the beginning of April (find Soros’s favorite stocks).