We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Crestwood Equity Partners LP (NYSE:CEQP).
Is Crestwood Equity Partners LP (NYSE:CEQP) an excellent investment now? Money managers are taking a pessimistic view. The number of bullish hedge fund bets went down by 1 recently. Our calculations also showed that CEQP isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Today there are many indicators stock traders have at their disposal to analyze stocks. A duo of the less known indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can beat the broader indices by a very impressive margin (see the details here).
[caption id="attachment_758454" align="aligncenter" width="399"] James Dondero of Highland Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind let's take a look at the latest hedge fund action encompassing Crestwood Equity Partners LP (NYSE:CEQP).
How are hedge funds trading Crestwood Equity Partners LP (NYSE:CEQP)?
At Q4's end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the third quarter of 2019. By comparison, 3 hedge funds held shares or bullish call options in CEQP a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Intrinsic Edge Capital held the most valuable stake in Crestwood Equity Partners LP (NYSE:CEQP), which was worth $8.7 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $3.5 million worth of shares. PEAK6 Capital Management, Highland Capital Management, and Citadel Investment Group 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 Intrinsic Edge Capital allocated the biggest weight to Crestwood Equity Partners LP (NYSE:CEQP), around 1.09% of its 13F portfolio. Highland Capital Management is also relatively very bullish on the stock, dishing out 0.15 percent of its 13F equity portfolio to CEQP.
Due to the fact that Crestwood Equity Partners LP (NYSE:CEQP) has experienced falling interest from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of hedge funds who sold off their entire stakes last quarter. At the top of the heap, Richard Driehaus's Driehaus Capital dropped the largest stake of all the hedgies monitored by Insider Monkey, comprising an estimated $0.6 million in stock, and Richard Chilton's Chilton Investment Company was right behind this move, as the fund dumped about $0.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let's now review hedge fund activity in other stocks similar to Crestwood Equity Partners LP (NYSE:CEQP). These stocks are Ra Pharmaceuticals, Inc. (NASDAQ:RARX), Welbilt, Inc. (NYSE:WBT), Casella Waste Systems Inc. (NASDAQ:CWST), and Synaptics Incorporated (NASDAQ:SYNA). This group of stocks' market valuations match CEQP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RARX,28,863481,7 WBT,28,582074,1 CWST,10,165394,-2 SYNA,26,487175,5 Average,23,524531,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $525 million. That figure was $16 million in CEQP's case. Ra Pharmaceuticals, Inc. (NASDAQ:RARX) is the most popular stock in this table. On the other hand Casella Waste Systems Inc. (NASDAQ:CWST) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Crestwood Equity Partners LP (NYSE:CEQP) is even less popular than CWST. Hedge funds dodged a bullet by taking a bearish stance towards CEQP. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately CEQP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CEQP investors were disappointed as the stock returned -85.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.