Is Equitrans Midstream Corporation (ETRN) Going to Burn These Hedge Funds?

In this article you are going to find out whether hedge funds think Equitrans Midstream Corporation (NYSE:ETRN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Equitrans Midstream Corporation (NYSE:ETRN) was in 19 hedge funds’ portfolios at the end of March. ETRN investors should pay attention to an increase in support from the world’s most elite money managers lately. There were 15 hedge funds in our database with ETRN positions at the end of the previous quarter. Our calculations also showed that ETRN 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).

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

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeremy Mindich - Scopia Capital

Jeremy Mindich of Scopia Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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. With all of this in mind we’re going to go over the fresh hedge fund action encompassing Equitrans Midstream Corporation (NYSE:ETRN).

How are hedge funds trading Equitrans Midstream Corporation (NYSE:ETRN)?

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the fourth quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in ETRN 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.

Among these funds, Scopia Capital held the most valuable stake in Equitrans Midstream Corporation (NYSE:ETRN), which was worth $58 million at the end of the third quarter. On the second spot was Kensico Capital which amassed $47.6 million worth of shares. Iridian Asset Management, Redwood Capital Management, and Point72 Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Scopia Capital allocated the biggest weight to Equitrans Midstream Corporation (NYSE:ETRN), around 5.31% of its 13F portfolio. Deep Basin Capital is also relatively very bullish on the stock, setting aside 4.14 percent of its 13F equity portfolio to ETRN.

Consequently, key hedge funds have been driving this bullishness. Scopia Capital, managed by Matt Sirovich and Jeremy Mindich, established the biggest position in Equitrans Midstream Corporation (NYSE:ETRN). Scopia Capital had $58 million invested in the company at the end of the quarter. Matt Smith’s Deep Basin Capital also initiated a $16.3 million position during the quarter. The other funds with new positions in the stock are Benjamin A. Smith’s Laurion Capital Management, Karim Abbadi and Edward McBride’s Centiva Capital, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s also examine hedge fund activity in other stocks similar to Equitrans Midstream Corporation (NYSE:ETRN). These stocks are Argo Group International Holdings, Ltd. (NYSE:ARGO), Sasol Limited (NYSE:SSL), Mueller Water Products, Inc. (NYSE:MWA), and McGrath RentCorp (NASDAQ:MGRC). This group of stocks’ market caps match ETRN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARGO 16 138003 -3
SSL 9 4982 2
MWA 20 180904 0
MGRC 20 90738 0
Average 16.25 103657 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $228 million in ETRN’s case. Mueller Water Products, Inc. (NYSE:MWA) is the most popular stock in this table. On the other hand Sasol Limited (NYSE:SSL) is the least popular one with only 9 bullish hedge fund positions. Equitrans Midstream Corporation (NYSE:ETRN) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on ETRN as the stock returned 75.7% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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