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Hedge Funds Have Never Been This Bullish On Tallgrass Energy, LP (TGE)

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year (through May 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. 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 Tallgrass Energy, LP (NYSE:TGE).

Tallgrass Energy, LP (NYSE:TGE) investors should pay attention to an increase in support from the world’s most elite money managers recently. Our calculations also showed that TGE isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

CITADEL INVESTMENT GROUP

We’re going to take a look at the fresh hedge fund action regarding Tallgrass Energy, LP (NYSE:TGE).

How have hedgies been trading Tallgrass Energy, LP (NYSE:TGE)?

Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards TGE over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with TGE Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Zimmer Partners, managed by Stuart J. Zimmer, holds the most valuable position in Tallgrass Energy, LP (NYSE:TGE). Zimmer Partners has a $14.7 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $10.1 million call position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish consist of James H. Litinsky’s JHL Capital Group, Steve Cohen’s Point72 Asset Management and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Now, key money managers were breaking ground themselves. Zimmer Partners, managed by Stuart J. Zimmer, assembled the biggest position in Tallgrass Energy, LP (NYSE:TGE). Zimmer Partners had $14.7 million invested in the company at the end of the quarter. James H. Litinsky’s JHL Capital Group also made a $8 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and David Harding’s Winton Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Tallgrass Energy, LP (NYSE:TGE) but similarly valued. We will take a look at Jones Lang LaSalle Inc (NYSE:JLL), Berry Global Group Inc (NYSE:BERY), Carlisle Companies, Inc. (NYSE:CSL), and Charles River Laboratories International Inc. (NYSE:CRL). This group of stocks’ market values resemble TGE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JLL 23 940107 4
BERY 40 2602301 -3
CSL 22 251859 1
CRL 24 994211 -4
Average 27.25 1197120 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $1197 million. That figure was $36 million in TGE’s case. Berry Global Group Inc (NYSE:BERY) is the most popular stock in this table. On the other hand Carlisle Companies, Inc. (NYSE:CSL) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Tallgrass Energy, LP (NYSE:TGE) is even less popular than CSL. Hedge funds dodged a bullet by taking a bearish stance towards TGE. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately TGE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TGE investors were disappointed as the stock returned -12.3% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.

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

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