Hedge Funds Are Selling Equitrans Midstream Corporation (ETRN)

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Equitrans Midstream Corporation (NYSE:ETRN).

Hedge fund interest in Equitrans Midstream Corporation (NYSE:ETRN) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare ETRN to other stocks including Tech Data Corp (NASDAQ:TECD), UniFirst Corp (NYSE:UNF), and Corelogic Inc (NYSE:CLGX) to get a better sense of its popularity.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Michael Lowenstein Kensico Capital

Michael Lowenstein of Kensico Capital

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. Let’s take a peek at the new hedge fund action encompassing Equitrans Midstream Corporation (NYSE:ETRN).

How have hedgies been trading Equitrans Midstream Corporation (NYSE:ETRN)?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Michael Lowenstein’s Kensico Capital has the largest position in Equitrans Midstream Corporation (NYSE:ETRN), worth close to $117.6 million, amounting to 2.2% of its total 13F portfolio. Coming in second is Iridian Asset Management, led by David Cohen and Harold Levy, holding a $100.1 million position; 1.6% of its 13F portfolio is allocated to the company. Other peers with similar optimism contain Steve Cohen’s Point72 Asset Management, Israel Englander’s Millennium Management and Jonathan Kolatch’s Redwood Capital Management. In terms of the portfolio weights assigned to each position Yaupon Capital allocated the biggest weight to Equitrans Midstream Corporation (NYSE:ETRN), around 4.12% of its 13F portfolio. Kensico Capital is also relatively very bullish on the stock, earmarking 2.25 percent of its 13F equity portfolio to ETRN.

Is ETRN A Good Stock To Buy?

Due to the fact that Equitrans Midstream Corporation (NYSE:ETRN) has faced bearish sentiment from hedge fund managers, it’s easy to see that there is a sect of money managers that decided to sell off their entire stakes in the third quarter. Interestingly, Matt Sirovich and Jeremy Mindich’s Scopia Capital sold off the largest investment of the 750 funds followed by Insider Monkey, totaling an estimated $133.7 million in stock, and Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors was right behind this move, as the fund dumped about $31.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Equitrans Midstream Corporation (NYSE:ETRN). We will take a look at Tech Data Corp (NASDAQ:TECD), UniFirst Corp (NYSE:UNF), Corelogic Inc (NYSE:CLGX), and Coherent, Inc. (NASDAQ:COHR). This group of stocks’ market values are closest to ETRN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TECD 21 450204 3
UNF 23 195066 0
CLGX 28 370528 5
COHR 17 227281 -2
Average 22.25 310770 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $311 million. That figure was $335 million in ETRN’s case. Corelogic Inc (NYSE:CLGX) is the most popular stock in this table. On the other hand Coherent, Inc. (NASDAQ:COHR) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Equitrans Midstream Corporation (NYSE:ETRN) is even less popular than COHR. Hedge funds dodged a bullet by taking a bearish stance towards ETRN. 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 ETRN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ETRN investors were disappointed as the stock returned -28.7% 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.