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Hedge Funds Have Never Been This Bullish On Equitrans Midstream Corporation (ETRN)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Equitrans Midstream Corporation (NYSE:ETRN) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Equitrans Midstream Corporation (NYSE:ETRN) a buy here? Prominent investors were in a bullish mood. The number of bullish hedge fund positions improved by 10 recently. Equitrans Midstream Corporation (NYSE:ETRN) was in 29 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ETRN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Jeremy Mindich - Scopia Capital

Jeremy Mindich of Scopia Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Equitrans Midstream Corporation (NYSE:ETRN).

What have hedge funds been doing with Equitrans Midstream Corporation (NYSE:ETRN)?

Heading into the third quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 53% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ETRN over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Among these funds, Scopia Capital held the most valuable stake in Equitrans Midstream Corporation (NYSE:ETRN), which was worth $127.6 million at the end of the third quarter. On the second spot was Third Point which amassed $83.1 million worth of shares. Iridian Asset Management, Kensico Capital, and Redwood Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Scopia Capital allocated the biggest weight to Equitrans Midstream Corporation (NYSE:ETRN), around 14.04% of its 13F portfolio. Valueworks LLC is also relatively very bullish on the stock, dishing out 4.52 percent of its 13F equity portfolio to ETRN.

Now, key money managers have jumped into Equitrans Midstream Corporation (NYSE:ETRN) headfirst. Third Point, managed by Dan Loeb, initiated the most valuable position in Equitrans Midstream Corporation (NYSE:ETRN). Third Point had $83.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $10.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Tom Wagner and Ara Cohen’s Knighthead Capital, Charles Lemonides’s Valueworks LLC, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s go over hedge fund activity in other stocks similar to Equitrans Midstream Corporation (NYSE:ETRN). We will take a look at Valvoline Inc. (NYSE:VVV), WPX Energy Inc (NYSE:WPX), Terreno Realty Corporation (NYSE:TRNO), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), Medallia, Inc. (NYSE:MDLA), Black Hills Corporation (NYSE:BKH), and Braskem SA (NYSE:BAK). This group of stocks’ market valuations are closest to ETRN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VVV 40 634494 1
WPX 37 230770 8
TRNO 9 29693 -1
ARNA 41 814569 5
MDLA 18 257841 -2
BKH 22 182307 4
BAK 7 36296 1
Average 24.9 312281 2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $312 million. That figure was $466 million in ETRN’s case. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the most popular stock in this table. On the other hand Braskem SA (NYSE:BAK) is the least popular one with only 7 bullish hedge fund positions. Equitrans Midstream Corporation (NYSE:ETRN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ETRN is 72.4. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Hedge funds were also right about betting on ETRN as the stock returned 19.4% during Q3 (through September 14th) 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.