“October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being ’08 and the Crash of ’87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the ’87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March ’09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher.” This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
Is EQT Corporation (NYSE:EQT) a bargain? Money managers are turning bullish. The number of long hedge fund positions improved by 5 in recent months.
In today’s marketplace there are a lot of metrics investors employ to grade publicly traded companies. A couple of the less known metrics are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite investment managers can beat the S&P 500 by a healthy margin (see the details here).
Didric Cederholm of Lion Point Capital
Let’s go over the new hedge fund action regarding EQT Corporation (NYSE:EQT).
How have hedgies been trading EQT Corporation (NYSE:EQT)?
Heading into the fourth quarter of 2018, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 50 hedge funds with a bullish position in EQT at the beginning of this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, Kensico Capital held the most valuable stake in EQT Corporation (NYSE:EQT), which was worth $421.3 million at the end of the third quarter. On the second spot was D E Shaw which amassed $403.9 million worth of shares. Moreover, Canyon Capital Advisors, Highfields Capital Management, and Iridian Asset Management were also bullish on EQT Corporation (NYSE:EQT), allocating a large percentage of their portfolios to this stock.
Consequently, key hedge funds were leading the bulls’ herd. Luxor Capital Group, managed by Christian Leone, initiated the most valuable position in EQT Corporation (NYSE:EQT). Luxor Capital Group had $46 million invested in the company at the end of the quarter. Jonathon Jacobson’s Highfields Capital Management also initiated a $44.2 million position during the quarter. The following funds were also among the new EQT investors: Didric Cederholm’s Lion Point, Steve Cohen’s Point72 Asset Management, and John Brandmeyer’s Cognios Capital.
Let’s now take a look at hedge fund activity in other stocks similar to EQT Corporation (NYSE:EQT). These stocks are The J.M. Smucker Company (NYSE:SJM), New Oriental Education & Technology Group Inc. (NYSE:EDU), Franco-Nevada Corporation (NYSE:FNV), and Kansas City Southern (NYSE:KSU). All of these stocks’ market caps are similar to EQT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SJM | 26 | 428285 | 3 |
| EDU | 25 | 915138 | -7 |
| FNV | 16 | 365669 | 1 |
| KSU | 24 | 363531 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $518 million. That figure was $2.48 billion in EQT’s case. The J.M. Smucker Company (NYSE:SJM) is the most popular stock in this table. On the other hand Franco-Nevada Corporation (NYSE:FNV) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks EQT Corporation (NYSE:EQT) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
