“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Crestwood Equity Partners LP (NYSE:CEQP) and see how it was affected.
Crestwood Equity Partners LP (NYSE:CEQP) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of the second quarter of 2019. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Shake Shack Inc (NYSE:SHAK), South State Corporation (NASDAQ:SSB), and Main Street Capital Corporation (NYSE:MAIN) to gather more data points. Our calculations also showed that CEQP isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the recent hedge fund action surrounding Crestwood Equity Partners LP (NYSE:CEQP).
What have hedge funds been doing with Crestwood Equity Partners LP (NYSE:CEQP)?
Heading into the third quarter of 2019, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CEQP over the last 16 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.
Of the funds tracked by Insider Monkey, Perella Weinberg Partners holds the largest position in Crestwood Equity Partners LP (NYSE:CEQP). Perella Weinberg Partners has a $15.9 million position in the stock, comprising 0.7% of its 13F portfolio. On Perella Weinberg Partners’s heels is Citadel Investment Group, led by Ken Griffin, holding a $3.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that are bullish encompass James Dondero’s Highland Capital Management, and Ken Griffin’s Citadel Investment Group.
Judging by the fact that Crestwood Equity Partners LP (NYSE:CEQP) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds that slashed their full holdings last quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest investment of the 750 funds followed by Insider Monkey, totaling an estimated $3.9 million in stock, and Richard Driehaus’s Driehaus Capital was right behind this move, as the fund said goodbye to about $1.2 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Crestwood Equity Partners LP (NYSE:CEQP) but similarly valued. We will take a look at Shake Shack Inc (NYSE:SHAK), South State Corporation (NASDAQ:SSB), Main Street Capital Corporation (NYSE:MAIN), and ManTech International Corporation (NASDAQ:MANT). All of these stocks’ market caps match CEQP’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $120 million. That figure was $22 million in CEQP’s case. Shake Shack Inc (NYSE:SHAK) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Crestwood Equity Partners LP (NYSE:CEQP) is even less popular than MAIN. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on CEQP, though not to the same extent, as the stock returned 3.8% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.