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Hedge Funds Souring On EQT Midstream Partners LP (EQM)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of EQT Midstream Partners LP (NYSE:EQM).

Is EQT Midstream Partners LP (NYSE:EQM) a buy, sell, or hold? The smart money is reducing their bets on the stock. The number of bullish hedge fund positions fell by 5 lately. Our calculations also showed that EQM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). EQM was in 6 hedge funds’ portfolios at the end of the first quarter of 2020. There were 11 hedge funds in our database with EQM positions at the end of the previous quarter.

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

To most investors, hedge funds are viewed as slow, old financial tools of yesteryear. While there are greater than 8000 funds with their doors open today, Our experts hone in on the masters of this group, approximately 850 funds. These investment experts handle most of the hedge fund industry’s total capital, and by watching their first-class equity investments, Insider Monkey has unearthed various investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the key hedge fund action encompassing EQT Midstream Partners LP (NYSE:EQM).

Hedge fund activity in EQT Midstream Partners LP (NYSE:EQM)

Heading into the second quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -45% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in EQM a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Zimmer Partners, managed by Stuart J. Zimmer, holds the largest position in EQT Midstream Partners LP (NYSE:EQM). Zimmer Partners has a $10.1 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $3.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism encompass James Dondero’s Highland Capital Management, George Soros’s Soros Fund Management and Matthew Strobeck’s Birchview Capital. In terms of the portfolio weights assigned to each position Birchview Capital allocated the biggest weight to EQT Midstream Partners LP (NYSE:EQM), around 0.54% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, dishing out 0.22 percent of its 13F equity portfolio to EQM.

Seeing as EQT Midstream Partners LP (NYSE:EQM) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few hedgies that elected to cut their positions entirely last quarter. At the top of the heap, Henry Breck’s Heronetta Management sold off the largest investment of all the hedgies monitored by Insider Monkey, totaling close to $2.5 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund sold off about $1.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 5 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as EQT Midstream Partners LP (NYSE:EQM) but similarly valued. These stocks are The Timken Company (NYSE:TKR), Shenandoah Telecommunications Company (NASDAQ:SHEN), Toll Brothers Inc (NYSE:TOL), and California Water Service Group (NYSE:CWT). This group of stocks’ market caps are closest to EQM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TKR 30 262596 -10
SHEN 11 97332 1
TOL 20 238559 -11
CWT 16 29065 -4
Average 19.25 156888 -6

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $15 million in EQM’s case. The Timken Company (NYSE:TKR) is the most popular stock in this table. On the other hand Shenandoah Telecommunications Company (NASDAQ:SHEN) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks EQT Midstream Partners LP (NYSE:EQM) is even less popular than SHEN. Hedge funds clearly dropped the ball on EQM as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on EQM as the stock returned 86.8% so far in the second quarter and outperformed the market by an even larger margin.

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