Is Kinder Morgan Inc (NYSE:KMI) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is KMI a good stock to buy now? Kinder Morgan Inc (NYSE:KMI) was in 46 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 72. KMI shareholders have witnessed a decrease in hedge fund interest recently. There were 50 hedge funds in our database with KMI holdings at the end of June. Our calculations also showed that KMI 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).
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 cannabis tech 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. Keeping this in mind let’s analyze the recent hedge fund action surrounding Kinder Morgan Inc (NYSE:KMI).
Do Hedge Funds Think KMI Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 38 hedge funds with a bullish position in KMI a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, FPR Partners held the most valuable stake in Kinder Morgan Inc (NYSE:KMI), which was worth $221.7 million at the end of the third quarter. On the second spot was First Pacific Advisors LLC which amassed $185.9 million worth of shares. Abrams Capital Management, Two Sigma Advisors, and D E Shaw 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 FPR Partners allocated the biggest weight to Kinder Morgan Inc (NYSE:KMI), around 7.62% of its 13F portfolio. Quaker Capital Investments is also relatively very bullish on the stock, designating 5.54 percent of its 13F equity portfolio to KMI.
Because Kinder Morgan Inc (NYSE:KMI) has faced declining sentiment from the smart money, it’s safe to say that there were a few hedgies that elected to cut their full holdings last quarter. At the top of the heap, Andrew Kurita’s Kettle Hill Capital Management sold off the largest position of the “upper crust” of funds tracked by Insider Monkey, valued at close to $16.2 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dropped about $15 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Kinder Morgan Inc (NYSE:KMI). We will take a look at Alcon Inc. (NYSE:ALC), Public Service Enterprise Group Incorporated (NYSE:PEG), Wayfair Inc (NYSE:W), Eni SpA (NYSE:E), ING Groep N.V. (NYSE:ING), Orange SA (NYSE:ORAN), and AutoZone, Inc. (NYSE:AZO). This group of stocks’ market valuations resemble KMI’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $1208 million. That figure was $940 million in KMI’s case. AutoZone, Inc. (NYSE:AZO) is the most popular stock in this table. On the other hand Orange SA (NYSE:ORAN) is the least popular one with only 4 bullish hedge fund positions. Kinder Morgan Inc (NYSE:KMI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KMI is 63. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on KMI as the stock returned 22.4% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.