Hedge Fund Sentiment Sluggish For Enterprise Products Partners L.P. (EPD)

Hedge fund managers like David Einhorn, Dan Loeb, and Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in a large-cap stock: Enterprise Products Partners L.P. (NYSE:EPD).

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Is Enterprise Products Partners L.P. (NYSE:EPD) worth your attention right now? Money managers are taking an optimistic view. The number of long hedge fund positions moved up recently. At the end of this article we will also compare EPD to other stocks including Duke Energy Corp (NYSE:DUK), Target Corporation (NYSE:TGT), and BlackRock, Inc. (NYSE:BLK) to get a better sense of its popularity.

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According to most shareholders, hedge funds are viewed as slow, outdated investment tools of yesteryear. While there are over 8,000 funds with their doors open at the moment, Insider Monkey, a website specializing in hedge funds, hones in on the moguls of this club, around 700 funds. These money managers control the bulk of the hedge fund industry’s total capital, and by keeping track of their top stock picks, Insider Monkey has spotted various investment strategies that have historically outrun the broader indices. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per year for a decade in its back tests.

Now, let’s view the recent action encompassing Enterprise Products Partners L.P. (NYSE:EPD).

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

At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 5% from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably.

According to Insider Monkey’s hedge fund database, Osterweis Capital Management, managed by John Osterweis, holds the largest position in Enterprise Products Partners L.P. (NYSE:EPD). Osterweis Capital Management has a $54.1 million position in the stock, comprising 2.4% of its 13F portfolio. Coming in second is Renaissance Technologies, managed by Jim Simons, which holds a $32.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions consist of James Dondero’s Highland Capital Management, Charles Davidson’s Wexford Capital, and Stuart J. Zimmer’s Zimmer Partners.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Wexford Capital, managed by Charles Davidson, established the largest position in Enterprise Products Partners L.P. (NYSE:EPD). Wexford Capital had $23.3 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $3.7 million position during the quarter. The other funds with new positions in the stock are Ross Berman’s Green Owl Capital Management, Adam Usdan’s Trellus Management Company, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s check out hedge fund activity in other stocks similar to Enterprise Products Partners L.P. (NYSE:EPD). We will take a look at Duke Energy Corp (NYSE:DUK), Target Corporation (NYSE:TGT), BlackRock, Inc. (NYSE:BLK), and HDFC Bank Limited (ADR) (NYSE:HDB). All of these stocks’ market caps are similar to EPD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DUK 22 646270 1
TGT 44 1454433 0
BLK 33 507373 -2
HDB 29 1332917 2

As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $985 million, while in EPD that figure was $210 million. Target Corporation (NYSE:TGT) is the most popular stock in this table. On the other hand Duke Energy Corp (NYSE:DUK) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Enterprise Products Partners L.P. (NYSE:EPD) is even less popular than DUK. Considering that hedge funds aren’t fond of this stock, 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.