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Did Hedge Funds Make The Right Call On Enterprise Products Partners L.P. (EPD) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional 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. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Enterprise Products Partners L.P. (NYSE:EPD) and determine whether hedge funds skillfully traded this stock.

Enterprise Products Partners L.P. (NYSE:EPD) was in 26 hedge funds’ portfolios at the end of March. EPD shareholders have witnessed a decrease in enthusiasm from smart money recently. There were 28 hedge funds in our database with EPD holdings at the end of the previous quarter. Our calculations also showed that EPD isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

At the moment there are many metrics shareholders can use to analyze publicly traded companies. A couple of the less utilized metrics are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best investment managers can outclass the market by a very impressive margin (see the details here).

Rudolph Kluiber of GRT Capital Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind we’re going to review the new hedge fund action surrounding Enterprise Products Partners L.P. (NYSE:EPD).

What does smart money think about Enterprise Products Partners L.P. (NYSE:EPD)?

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the fourth quarter of 2019. On the other hand, there were a total of 20 hedge funds with a bullish position in EPD a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

More specifically, Arrowstreet Capital was the largest shareholder of Enterprise Products Partners L.P. (NYSE:EPD), with a stake worth $78.5 million reported as of the end of September. Trailing Arrowstreet Capital was Zimmer Partners, which amassed a stake valued at $49.8 million. Moore Global Investments, Magnetar Capital, and Heronetta 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 Heronetta Management allocated the biggest weight to Enterprise Products Partners L.P. (NYSE:EPD), around 15.26% of its 13F portfolio. Moore Global Investments is also relatively very bullish on the stock, setting aside 1.58 percent of its 13F equity portfolio to EPD.

Seeing as Enterprise Products Partners L.P. (NYSE:EPD) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedge funds who sold off their positions entirely heading into Q4. Intriguingly, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors sold off the largest investment of the 750 funds followed by Insider Monkey, comprising close to $33.8 million in stock. Ken Fisher’s fund, Fisher Asset Management, also dumped its stock, about $16.5 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 2 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Enterprise Products Partners L.P. (NYSE:EPD) but similarly valued. These stocks are Orange SA (NYSE:ORAN), General Mills, Inc. (NYSE:GIS), Eaton Corporation plc (NYSE:ETN), and FedEx Corporation (NYSE:FDX). This group of stocks’ market values match EPD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ORAN 5 12940 3
GIS 39 690598 2
ETN 35 823530 -7
FDX 50 1092300 5
Average 32.25 654842 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $655 million. That figure was $215 million in EPD’s case. FedEx Corporation (NYSE:FDX) is the most popular stock in this table. On the other hand Orange SA (NYSE:ORAN) is the least popular one with only 5 bullish hedge fund positions. Enterprise Products Partners L.P. (NYSE:EPD) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on EPD as the stock returned 30.4% during the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.