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Enterprise Products Partners L.P. (EPD): Hedge Funds Cashing Out

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Enterprise Products Partners L.P. (NYSE:EPD) based on that data.

Enterprise Products Partners L.P. (NYSE:EPD) was in 26 hedge funds’ portfolios at the end of the first quarter of 2020. EPD has seen a decrease in activity from the world’s largest hedge funds in recent months. There were 28 hedge funds in our database with EPD positions 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 58 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.

New York Stock Exchange

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the recent hedge fund action surrounding Enterprise Products Partners L.P. (NYSE:EPD).

How have hedgies been trading Enterprise Products Partners L.P. (NYSE:EPD)?

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in EPD a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Among these funds, Arrowstreet Capital held the most valuable stake in Enterprise Products Partners L.P. (NYSE:EPD), which was worth $78.5 million at the end of the third quarter. On the second spot was Zimmer Partners which amassed $49.8 million worth of shares. 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, designating 1.58 percent of its 13F equity portfolio to EPD.

Since Enterprise Products Partners L.P. (NYSE:EPD) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of funds that slashed their full holdings in the first quarter. Intriguingly, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors dropped the biggest investment of the 750 funds followed by Insider Monkey, valued at an estimated $33.8 million in stock. Ken Fisher’s fund, Fisher Asset Management, also said goodbye to its stock, about $16.5 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to Enterprise Products Partners L.P. (NYSE:EPD). We will take a look at 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on EPD as the stock returned 37.1% 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.