ClearBridge Investments, an investment management firm, published its “Dividend Strategy” first quarter 2022 investor letter – a copy of which can be downloaded here. The ClearBridge Dividend Strategy outperformed its S&P 500 Index benchmark during the first quarter. On an absolute basis, the Strategy had gains in three of 11 sectors in which it was invested for the quarter. The main contributors to Strategy performance were the energy, industrials, and utility sectors. The materials, IT, and consumer discretionary sectors, meanwhile, were the main detractors. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, ClearBridge Investments Dividend Strategy mentioned EQT Corporation (NYSE:EQT) and explained its insights for the company. Founded in 1888, EQT Corporation (NYSE:EQT) is a Pittsburgh, Pennsylvania-based independent natural gas producer with a $15.9 billion market capitalization. EQT Corporation (NYSE:EQT) delivered a 94.22% return since the beginning of the year, while its 12-month returns are up by 139.73%. The stock closed at $42.36 per share on April 14, 2022.
Here is what ClearBridge Investments Dividend Strategy has to say about EQT Corporation (NYSE:EQT) in its Q1 2022 investor letter:
“In the early days of the invasion, we made two measured changes to the portfolio based on longer-term fallout we anticipate from Russia’s invasion of Ukraine. First, we initiated small positions in U.S. natural gas producer EQT (NYSE:EQT).
Given its superior environmental profile compared to other fossil fuels, we have long favored natural gas in our energy holdings. Combustion of natural gas releases 50% less CO2 than coal, 25% less CO2 than gasoline and dramatically less particulate and pollution, per the U.S. Energy Information Administration. With the advances in shale production this century, the U.S. has become a natural gas powerhouse with some of the lowest-cost and largest reserves in the world. But because natural gas is difficult to ship across the ocean (it must be liquefied, which requires expensive infrastructure on both ends of the voyage), America’s gas bounty has ironically proved a burden for U.S. producers.
The surplus of natural gas in North America has resulted in low prices and weak earnings for gas-focused producers. Exports, while growing, are restrained by the high cost of building export infrastructure. Europe, in a Faustian bargain, has relied on abundant, inexpensive Russian gas transported by pipeline.
Despite the abundance of low-cost resources and a superior environmental profile, the investment case for U.S. natural gas producers was previously unfavorable due to oversupply in the domestic market. In the days preceding the invasion, we were quick to realize the war would change global energy flows. Europe is shifting away from Russia and toward new sources of imported liquified natural gas. We purchased our stakes in EQT to capitalize on these trends. The recently announced energy pact between the U.S. and Europe represents an early positive datapoint in support of this investment thesis. We funded these purchases, in part, with a trim of Pioneer. While we continue to like Pioneer, the risk/reward outlook for the stock is more balanced following recent gains in the shares.”
Natural Gas
Our calculations show that EQT Corporation (NYSE:EQT) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. EQT Corporation (NYSE:EQT) was in 46 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 57 funds in the previous quarter. EQT Corporation (NYSE:EQT) delivered an 80.18% return in the past 3 months.
In April 2022, we published an article that includes EQT Corporation (NYSE:EQT) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
