Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Kinder Morgan Inc (NYSE:KMI).
Kinder Morgan Inc (NYSE:KMI) has experienced an increase in activity from the world’s largest hedge funds of late. Kinder Morgan Inc (NYSE:KMI) was in 50 hedge funds’ portfolios at the end of June. The all time high for this statistics is 72. Our calculations also showed that KMI isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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 scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now let’s take a gander at the recent hedge fund action encompassing Kinder Morgan Inc (NYSE:KMI).
Hedge fund activity in Kinder Morgan Inc (NYSE:KMI)
At the end of the second quarter, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards KMI over the last 20 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, FPR Partners held the most valuable stake in Kinder Morgan Inc (NYSE:KMI), which was worth $236 million at the end of the third quarter. On the second spot was First Pacific Advisors LLC which amassed $225.6 million worth of shares. Abrams Capital Management, D E Shaw, and AQR Capital 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 FPR Partners allocated the biggest weight to Kinder Morgan Inc (NYSE:KMI), around 8.21% of its 13F portfolio. Quaker Capital Investments is also relatively very bullish on the stock, designating 6.66 percent of its 13F equity portfolio to KMI.
As one would reasonably expect, some big names were breaking ground themselves. Kettle Hill Capital Management, managed by Andrew Kurita, created the most valuable position in Kinder Morgan Inc (NYSE:KMI). Kettle Hill Capital Management had $16.2 million invested in the company at the end of the quarter. Mark G. Schoeppner’s Quaker Capital Investments also initiated a $14.7 million position during the quarter. The following funds were also among the new KMI investors: Wayne Cooperman’s Cobalt Capital Management, Clint Carlson’s Carlson Capital, and Matt Smith’s Deep Basin Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Kinder Morgan Inc (NYSE:KMI) but similarly valued. We will take a look at Sempra Energy (NYSE:SRE), Snap Inc. (NYSE:SNAP), The Bank of New York Mellon Corporation (NYSE:BK), Bank of Montreal (NYSE:BMO), Constellation Brands, Inc. (NYSE:STZ), Thomson Reuters Corporation (NYSE:TRI), and Banco Bradesco SA (NYSE:BBD). 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|
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.4 hedge funds with bullish positions and the average amount invested in these stocks was $1301 million. That figure was $1091 million in KMI’s case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand Bank of Montreal (NYSE:BMO) is the least popular one with only 13 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 75.1. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 30% in 2020 through October 23rd and beat the market by 21 percentage points. Unfortunately KMI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on KMI were disappointed as the stock returned -14.2% since the end of June (through 10/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.