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Horos Asset Management is Betting on Teekay LNG Partners (TGP) Stock

Horos Asset Management recently released its Q2 2020 Investor Letter, a copy of which you can download here. The investment firms portfolios have not been immune to this recovery, with Horos Value Internacional posting a 16.0% return in the second quarter in line with the 16.5% rise of its benchmark index, and Horos Value Iberia returning 14.1%, above the 8.5% of its benchmark index. You should check out Horos Asset Management’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, Horos Asset Management highlighted a few stocks and Teekay LNG Partners LP (NYSE:TGP) is one of them. The investment firm said it trimmed its position in Teekay LNG Partners LP (NYSE:TGP) stock in Q2 2020. Teekay LNG Partners LP (NYSE:TGP) is an independent owner and operator of LNG carriers. Year-to-date, Teekay LNG Partners LP (NYSE:TGP) stock lost 29.6% and on September 14th it had a closing price of $10.95. Here is what Horos Asset Management said:

“We trimmed our exposure to the two Teekay companies after the strong rally they experienced in April from the March lows (Teekay Corp. rallied 120% while Teekay LNG 70%). In the case of Teekay LNG, the share price has been relatively flat since then, while the holding company Teekay Corp. has had a sharp decline and returned to its lows. What justifies this poor performance of the company on the stock market?

On the one hand, Teekay Corp. and Teekay LNG finally announced the expected transaction of the Incentive Distribution Rights (IDRs) that Teekay Corp. held over Teekay LNG. Specifically, Teekay LNG acquired the IDRs by issuing 10.75 million shares (around $120 million at the time of the transaction). As a reminder of the functioning of the IDRs, Teekay Corp. was entitled to receive an extraordinary dividend from Teekay LNG, provided that the latter exceeded certain minimum thresholds for earnings distributions to its shareholders. In addition, as we have mentioned in the past, Teekay Corp. controlled c.34% of Teekay LNG (31.7% via common shares and 2.0% via a General Partner agreement). In our opinion, this complex capital structure made it difficult to value both companies, so the transaction announced on May 11 looks positive to us. However, the terms of this transaction were somewhat disappointing from the perspective of Teekay Corp.’s shareholders—who now control 42.5% of Teekay LNG—so we adjusted our valuation of Teekay Corp. downwards.”

Ralf Gosch/Shutterstock.com

In Q1 2020, the number of bullish hedge fund positions on Teekay LNG Partners LP (NYSE:TGP) stock decreased by about 23% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with TGP’s growth potential. Our calculations showed that Teekay LNG Partners LP (NYSE:TGP) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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