Were Hedge Funds Right About Betting On Kinder Morgan Inc (KMI)?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Kinder Morgan Inc (NYSE:KMI) based on that data.

Kinder Morgan Inc (NYSE:KMI) has seen a decrease in support from the world’s most elite money managers recently, though overall hedge fund sentiment is still very bullish.

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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

William Harnisch

Let’s check out the new hedge fund action surrounding Kinder Morgan Inc (NYSE:KMI).

How are hedge funds trading Kinder Morgan Inc (NYSE:KMI)?

Heading into the first quarter of 2019, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KMI over the last 14 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


The largest stake in Kinder Morgan Inc (NYSE:KMI) was held by FPR Partners, which reported holding $447.5 million worth of stock at the end of September. It was followed by First Pacific Advisors LLC with a $265.7 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Abrams Capital Management.

Seeing as Kinder Morgan Inc (NYSE:KMI) has faced declining sentiment from the smart money, it’s easy to see that there is a sect of funds that elected to cut their positions entirely last quarter. Intriguingly, Charles Clough’s Clough Capital Partners said goodbye to the biggest stake of all the hedgies watched by Insider Monkey, worth about $17 million in stock, and Ed Bosek’s BeaconLight Capital was right behind this move, as the fund dumped about $9.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let’s now take a look at 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 Prudential Financial Inc (NYSE:PRU), Royal Bank of Scotland Group plc (NYSE:RBS), Fidelity National Information Services Inc. (NYSE:FIS), and BB&T Corporation (NYSE:BBT). This group of stocks’ market valuations are similar to KMI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRU 31 516818 -2
RBS 3 26762 -3
FIS 37 1540485 1
BBT 31 131659 11
Average 25.5 553931 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $554 million. That figure was $1659 million in KMI’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand Royal Bank of Scotland Group plc (NYSE:RBS) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Kinder Morgan Inc (NYSE:KMI) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on KMI as the stock returned 30.6% and outperformed the market as well.

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