Hedge Funds Head For Energy Transfer Equity LP (ETE)’s Exits: Spooked by Dakota Pipeline?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Energy Transfer Equity LP (NYSE:ETE).

Energy Transfer Equity LP (NYSE:ETE) shareholders have witnessed a decrease in hedge fund sentiment in recent months. ETE was in 20 hedge funds’ portfolios at the end of September. There were 30 hedge funds in our database with ETE holdings at the end of the June quarter. At the end of this article we will also compare ETE to other stocks including Incyte Corporation (NASDAQ:INCY), Rockwell Automation (NYSE:ROK), and Essex Property Trust Inc (NYSE:ESS) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What does the smart money think about Energy Transfer Equity LP (NYSE:ETE)?

At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a 33% drop from the previous quarter, and the third-consecutive quarter with a drop in hedge fund positions in the stock. There were a total of 33 hedge funds with a bullish position in ETE at the beginning of this year. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, OZ Management, led by Daniel S. Och, holds the biggest position in Energy Transfer Equity, L.P. (NYSE:ETE). OZ Management has a $261.9 million position in the stock, comprising 1.5% of its 13F portfolio. Some other peers that are bullish contain Stuart J. Zimmer’s Zimmer Partners and James Dondero’s Highland Capital Management. We should note that one of these hedge funds (Zimmer Partners) was among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Due to the fact that Energy Transfer Equity, L.P. (NYSE:ETE) has sustained falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds that elected to cut their entire stakes by the end of the third quarter. At the top of the heap, Marc Lisker, Glenn Fuhrman and John Phelan’s MSDC Management cut the largest position of all the investors monitored by Insider Monkey, worth close to $18.8 million in stock, and Gordy Holterman and Derek Dunn’s Overland Advisors was right behind this move, as the fund said goodbye to about $12.9 million worth of shares.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Energy Transfer Equity, L.P. (NYSE:ETE) but similarly valued. We will take a look at Incyte Corporation (NASDAQ:INCY), Rockwell Automation (NYSE:ROK), Essex Property Trust Inc (NYSE:ESS), and Ameriprise Financial, Inc. (NYSE:AMP). This group of stocks’ market caps match ETE’s market cap.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $1.08 billion. That figure was $690 million in ETE’s case. Incyte Corporation (NASDAQ:INCY) is the most popular stock in this table. On the other hand Essex Property Trust Inc (NYSE:ESS) is the least popular one with only 19 bullish hedge fund positions. Energy Transfer Equity, L.P. (NYSE:ETE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard INCY might be a better candidate to consider taking a long position in.

Disclosure: None