Where Do Hedge Funds Stand On Cheniere Energy Partners LP (CQP)?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Cheniere Energy Partners LP (NYSE:CQP).

Hedge fund interest in Cheniere Energy Partners LP (NYSE:CQP) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CQP 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). At the end of this article we will also compare CQP to other stocks including TransUnion (NYSE:TRU), International Paper Company (NYSE:IP), and Teleflex Incorporated (NYSE:TFX) to get a better sense of its popularity.

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. 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. Keeping this in mind let’s review the recent hedge fund action surrounding Cheniere Energy Partners LP (NYSE:CQP).

What does smart money think about Cheniere Energy Partners LP (NYSE:CQP)?

At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in CQP a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

More specifically, Columbus Hill Capital Management was the largest shareholder of Cheniere Energy Partners LP (NYSE:CQP), with a stake worth $6.9 million reported as of the end of September. Trailing Columbus Hill Capital Management was Citadel Investment Group, which amassed a stake valued at $1.2 million. PEAK6 Capital Management was 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 Southport Management allocated the biggest weight to Cheniere Energy Partners LP (NYSE:CQP), around 5.91% of its 13F portfolio. Columbus Hill Capital Management is also relatively very bullish on the stock, designating 0.89 percent of its 13F equity portfolio to CQP.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Cheniere Energy Partners LP (NYSE:CQP) but similarly valued. We will take a look at TransUnion (NYSE:TRU), International Paper Company (NYSE:IP), Teleflex Incorporated (NYSE:TFX), CBRE Group, Inc. (NYSE:CBRE), Arista Networks Inc (NYSE:ANET), Invitation Homes Inc. (NYSE:INVH), and Varian Medical Systems, Inc. (NYSE:VAR). This group of stocks’ market caps are similar to CQP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRU 47 1684887 0
IP 32 199317 3
TFX 40 753356 12
CBRE 24 1609802 -5
ANET 27 333863 -6
INVH 28 648119 -5
VAR 52 1699418 25
Average 35.7 989823 3.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.7 hedge funds with bullish positions and the average amount invested in these stocks was $990 million. That figure was $9 million in CQP’s case. Varian Medical Systems, Inc. (NYSE:VAR) is the most popular stock in this table. On the other hand CBRE Group, Inc. (NYSE:CBRE) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Cheniere Energy Partners LP (NYSE:CQP) is even less popular than CBRE. Our overall hedge fund sentiment score for CQP is 16.3. 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. Hedge funds clearly dropped the ball on CQP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on CQP as the stock returned 18.6% since Q3 (through November 23rd) and outperformed the market by an even larger margin.

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