At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Enterprise Products Partners L.P. (NYSE:EPD) makes for a good investment right now.
Is EPD a good stock to buy? Enterprise Products Partners L.P. (NYSE:EPD) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 30 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that EPD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare EPD to other stocks including Sempra Energy (NYSE:SRE), O’Reilly Automotive Inc (NASDAQ:ORLY), and Seagen Inc. (NASDAQ:SGEN) to get a better sense of its popularity.
Video: 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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s take a look at the fresh hedge fund action encompassing Enterprise Products Partners L.P. (NYSE:EPD).
Do Hedge Funds Think EPD Is A Good Stock To Buy Now?
At third quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in EPD a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Stuart J. Zimmer’s Zimmer Partners has the number one position in Enterprise Products Partners L.P. (NYSE:EPD), worth close to $46.3 million, corresponding to 0.7% of its total 13F portfolio. The second largest stake is held by Moore Global Investments, led by Louis Bacon, holding a $34.2 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Allan Teh’s Kamunting Street Capital, and Henry Breck’s Heronetta Management. In terms of the portfolio weights assigned to each position Heronetta Management allocated the biggest weight to Enterprise Products Partners L.P. (NYSE:EPD), around 14.27% of its 13F portfolio. Kamunting Street Capital is also relatively very bullish on the stock, setting aside 10.36 percent of its 13F equity portfolio to EPD.
Because Enterprise Products Partners L.P. (NYSE:EPD) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedge funds who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Mark Coe’s Intrinsic Edge Capital cut the biggest position of the 750 funds tracked by Insider Monkey, valued at close to $3.2 million in stock. Mark McMeans’s fund, Brasada Capital Management, also dropped its stock, about $2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Enterprise Products Partners L.P. (NYSE:EPD). These stocks are Sempra Energy (NYSE:SRE), O’Reilly Automotive Inc (NASDAQ:ORLY), Seagen Inc. (NASDAQ:SGEN), ICICI Bank Limited (NYSE:IBN), Centene Corporation (NYSE:CNC), Metlife Inc (NYSE:MET), and IDEXX Laboratories, Inc. (NASDAQ:IDXX). This group of stocks’ market valuations are closest to EPD’s market valuation.
|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 39.6 hedge funds with bullish positions and the average amount invested in these stocks was $2498 million. That figure was $178 million in EPD’s case. O’Reilly Automotive Inc (NASDAQ:ORLY) is the most popular stock in this table. On the other hand ICICI Bank Limited (NYSE:IBN) is the least popular one with only 24 bullish hedge fund positions. Enterprise Products Partners L.P. (NYSE:EPD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EPD is 43.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on EPD as the stock returned 33.7% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.