Hedge Funds Are Buying EQT Midstream Partners LP (EQM)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like EQT Midstream Partners LP (NYSE:EQM).

EQT Midstream Partners LP (NYSE:EQM) was in 11 hedge funds’ portfolios at the end of September. EQM shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. There were 8 hedge funds in our database with EQM holdings at the end of the previous quarter. Our calculations also showed that EQM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most shareholders, hedge funds are perceived as worthless, old financial tools of the past. While there are more than 8000 funds with their doors open at the moment, Our researchers hone in on the moguls of this club, around 750 funds. These investment experts handle the lion’s share of the smart money’s total capital, and by following their finest stock picks, Insider Monkey has uncovered many investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

George Soros of Soros Fund Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the fresh hedge fund action encompassing EQT Midstream Partners LP (NYSE:EQM).

How have hedgies been trading EQT Midstream Partners LP (NYSE:EQM)?

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the second quarter of 2019. By comparison, 8 hedge funds held shares or bullish call options in EQM a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is EQM A Good Stock To Buy?

The largest stake in EQT Midstream Partners LP (NYSE:EQM) was held by Zimmer Partners, which reported holding $21.4 million worth of stock at the end of September. It was followed by Birchview Capital with a $3.3 million position. Other investors bullish on the company included Arrowstreet Capital, Soros Fund Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Birchview Capital allocated the biggest weight to EQT Midstream Partners LP (NYSE:EQM), around 2.21% of its 13F portfolio. Cerebellum Capital is also relatively very bullish on the stock, designating 0.29 percent of its 13F equity portfolio to EQM.

As aggregate interest increased, key hedge funds have jumped into EQT Midstream Partners LP (NYSE:EQM) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in EQT Midstream Partners LP (NYSE:EQM). Arrowstreet Capital had $2.9 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $1.1 million position during the quarter. The only other fund with a new position in the stock is Richard Chilton’s Chilton Investment Company.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as EQT Midstream Partners LP (NYSE:EQM) but similarly valued. These stocks are Logitech International SA (NASDAQ:LOGI), CAE, Inc. (NYSE:CAE), SL Green Realty Corp (NYSE:SLG), and LPL Financial Holdings Inc (NASDAQ:LPLA). This group of stocks’ market values resemble EQM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LOGI 14 213458 -2
CAE 11 145277 1
SLG 24 440534 9
LPLA 34 1015258 3
Average 20.75 453632 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $454 million. That figure was $36 million in EQM’s case. LPL Financial Holdings Inc (NASDAQ:LPLA) is the most popular stock in this table. On the other hand CAE, Inc. (NYSE:CAE) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks EQT Midstream Partners LP (NYSE:EQM) is even less popular than CAE. Hedge funds dodged a bullet by taking a bearish stance towards EQM. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately EQM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); EQM investors were disappointed as the stock returned -26.4% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

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