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Were Hedge Funds Right About Flocking Into Tellurian Inc. (TELL) ?

“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Tellurian Inc. (NASDAQ:TELL) and see how it was affected.

Tellurian Inc. (NASDAQ:TELL) was in 15 hedge funds’ portfolios at the end of December. TELL shareholders have witnessed an increase in enthusiasm from smart money in recent months. There were 14 hedge funds in our database with TELL holdings at the end of the previous quarter. Our calculations also showed that TELL isn’t among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

T Boone Pickens

We’re going to take a look at the key hedge fund action surrounding Tellurian Inc. (NASDAQ:TELL).

Hedge fund activity in Tellurian Inc. (NASDAQ:TELL)

At Q4’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TELL over the last 14 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

TELL_apr2019

When looking at the institutional investors followed by Insider Monkey, Todd J. Kantor’s Encompass Capital Advisors has the largest position in Tellurian Inc. (NASDAQ:TELL), worth close to $17.4 million, corresponding to 1.9% of its total 13F portfolio. The second largest stake is held by Blackstart Capital, managed by Brian Olson, Baehyun Sung, and Jamie Waters, which holds a $16 million position; the fund has 3.4% of its 13F portfolio invested in the stock. Remaining peers with similar optimism consist of Israel Englander’s Millennium Management, Jos Shaver’s Electron Capital Partners and Steve Cohen’s Point72 Asset Management.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. GLG Partners, managed by Noam Gottesman, initiated the biggest position in Tellurian Inc. (NASDAQ:TELL). GLG Partners had $4 million invested in the company at the end of the quarter. Steve Pattyn’s Yaupon Capital also initiated a $1.9 million position during the quarter. The only other fund with a new position in the stock is T Boone Pickens’s BP Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Tellurian Inc. (NASDAQ:TELL) but similarly valued. We will take a look at Reata Pharmaceuticals, Inc. (NASDAQ:RETA), Baozun Inc (NASDAQ:BZUN), Stepan Company (NYSE:SCL), and Crescent Point Energy Corp (NYSE:CPG). This group of stocks’ market valuations match TELL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RETA 17 158938 0
BZUN 14 43238 -3
SCL 12 35740 2
CPG 16 82975 4
Average 14.75 80223 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $95 million in TELL’s case. Reata Pharmaceuticals, Inc. (NASDAQ:RETA) is the most popular stock in this table. On the other hand Stepan Company (NYSE:SCL) is the least popular one with only 12 bullish hedge fund positions. Tellurian Inc. (NASDAQ:TELL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on TELL as the stock returned 44.3% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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