Where Do Hedge Funds Stand On Energy Transfer L.P. (ET)?

In this article we are going to use hedge fund sentiment as a tool and determine whether Energy Transfer L.P. (NYSE:ET) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Hedge fund interest in Energy Transfer L.P. (NYSE:ET) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ET isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare ET to other stocks including Qorvo Inc (NASDAQ:QRVO), ORIX Corporation (NYSE:IX), and Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) to get a better sense of its popularity.

If you’d ask most shareholders, hedge funds are viewed as underperforming, outdated investment vehicles of the past. While there are greater than 8000 funds trading at the moment, Our researchers look at the masters of this group, approximately 850 funds. It is estimated that this group of investors have their hands on bulk of all hedge funds’ total capital, and by keeping track of their matchless equity investments, Insider Monkey has unearthed a number of investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Bill Miller

Bill Miller of Miller Value Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to analyze the recent hedge fund action encompassing Energy Transfer L.P. (NYSE:ET).

Do Hedge Funds Think ET Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 33 hedge funds held shares or bullish call options in ET a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Appaloosa Management LP held the most valuable stake in Energy Transfer L.P. (NYSE:ET), which was worth $175.3 million at the end of the fourth quarter. On the second spot was Abrams Capital Management which amassed $169.9 million worth of shares. Miller Value Partners, Zimmer Partners, and Omega Advisors 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 Raging Capital Management allocated the biggest weight to Energy Transfer L.P. (NYSE:ET), around 13.18% of its 13F portfolio. Heronetta Management is also relatively very bullish on the stock, designating 6.26 percent of its 13F equity portfolio to ET.

Seeing as Energy Transfer L.P. (NYSE:ET) has witnessed declining sentiment from the smart money, we can see that there exists a select few hedge funds that slashed their positions entirely heading into Q2. At the top of the heap, James Dondero’s Highland Capital Management cut the biggest position of the 750 funds monitored by Insider Monkey, worth an estimated $9.9 million in stock. Matthew Halbower’s fund, Pentwater Capital Management, also sold off its stock, about $2.6 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Energy Transfer L.P. (NYSE:ET) but similarly valued. We will take a look at Qorvo Inc (NASDAQ:QRVO), ORIX Corporation (NYSE:IX), Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), Ingersoll Rand Inc. (NYSE:IR), Generac Holdings Inc. (NYSE:GNRC), Tractor Supply Company (NASDAQ:TSCO), and Hewlett Packard Enterprise Company (NYSE:HPE). All of these stocks’ market caps are closest to ET’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QRVO 41 2329699 -10
IX 5 4886 2
HZNP 48 4177404 -7
IR 35 789022 1
GNRC 36 699301 4
TSCO 29 1191886 -10
HPE 27 1067351 -3
Average 31.6 1465650 -3.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.6 hedge funds with bullish positions and the average amount invested in these stocks was $1466 million. That figure was $648 million in ET’s case. Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 5 bullish hedge fund positions. Energy Transfer L.P. (NYSE:ET) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ET is 49.1. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. A small number of hedge funds were also right about betting on ET as the stock returned 40.1% since the end of the first quarter (through 7/9) and outperformed the market by an even larger margin.

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