Hedge Funds Are Coming Back To Cheniere Energy, Inc. (LNG)

We at Insider Monkey have gone over 873 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 June 30th. In this article, we look at what those funds think of Cheniere Energy, Inc. (NYSE:LNG) based on that data.

Cheniere Energy, Inc. (NYSE:LNG) was in 49 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 62. LNG investors should pay attention to an increase in enthusiasm from smart money lately. There were 40 hedge funds in our database with LNG positions at the end of the first quarter. Our calculations also showed that LNG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Carl Icahn - Icahn Capital Lp

Carl Icahn of Icahn Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to analyze the new hedge fund action surrounding Cheniere Energy, Inc. (NYSE:LNG).

Do Hedge Funds Think LNG Is A Good Stock To Buy Now?

At second quarter’s end, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in LNG over the last 24 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Carl Icahn’s Icahn Capital LP has the biggest position in Cheniere Energy, Inc. (NYSE:LNG), worth close to $1.4025 billion, comprising 5.8% of its total 13F portfolio. Sitting at the No. 2 spot is Steadfast Capital Management, managed by Robert Pitts, which holds a $278.3 million position; 2.6% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish contain Farhad Nanji and Michael DeMichele’s MFN Partners, Michael Lowenstein’s Kensico Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position MFN Partners allocated the biggest weight to Cheniere Energy, Inc. (NYSE:LNG), around 13.29% of its 13F portfolio. Freshford Capital Management is also relatively very bullish on the stock, dishing out 12.17 percent of its 13F equity portfolio to LNG.

As aggregate interest increased, some big names have jumped into Cheniere Energy, Inc. (NYSE:LNG) headfirst. Antara Capital, managed by Himanshu Gulati, assembled the most outsized call position in Cheniere Energy, Inc. (NYSE:LNG). Antara Capital had $17.3 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $13 million position during the quarter. The other funds with brand new LNG positions are Carson Yost’s Yost Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management, and Israel Englander’s Millennium Management.

Let’s check out hedge fund activity in other stocks similar to Cheniere Energy, Inc. (NYSE:LNG). These stocks are Martin Marietta Materials, Inc. (NYSE:MLM), Edison International (NYSE:EIX), Extra Space Storage, Inc. (NYSE:EXR), Kellogg Company (NYSE:K), Paycom Software Inc (NYSE:PAYC), Western Digital Corporation (NASDAQ:WDC), and Royal Caribbean Cruises Ltd. (NYSE:RCL). This group of stocks’ market caps resemble LNG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MLM 34 2014762 -7
EIX 18 1386816 -17
EXR 21 176013 -7
K 32 482871 0
PAYC 39 1149714 -7
WDC 57 2114351 -1
RCL 42 596573 0
Average 34.7 1131586 -5.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.7 hedge funds with bullish positions and the average amount invested in these stocks was $1132 million. That figure was $2944 million in LNG’s case. Western Digital Corporation (NASDAQ:WDC) is the most popular stock in this table. On the other hand Edison International (NYSE:EIX) is the least popular one with only 18 bullish hedge fund positions. Cheniere Energy, Inc. (NYSE:LNG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LNG is 73.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on LNG as the stock returned 13.9% since the end of Q2 (through 10/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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