Hedge fund titans follow Carl Icahn in building Southwest Gas positions

Hedge funds led by some of the financial industry's best-known investors built positions in Southwest Gas Holdings Inc. as fellow Wall Street titan Carl Icahn launched a bid to take over the Las Vegas-based natural gas distributor.

Icahn Capital LP led institutional investors in Southwest Gas net stock purchases in the final quarter of 2021, exiting the period with nearly 2.9 million shares as of Dec. 31, 2021. The activist investor grew his previous stake to establish Icahn Capital as Southwest Gas' fourth-largest shareholder.

Icahn's campaign has contributed to volatile trading in Southwest Gas stock, presenting attractive conditions for hedge funds.

Big buyers

The second-largest net buyer of Southwest Gas shares was Citadel Advisors LLC, the hedge fund controlled by investment manager Kenneth Griffin. Citadel built a position in Southwest Gas almost from scratch in the final quarter of 2021. It exited the year with nearly 839,000 shares, or 1.4% of outstanding Southwest Gas common stock, according to S&P Global Market Intelligence's review of Form 13F filings with the SEC.

That is a modest position for Citadel, a dominant force on Wall Street with a long history of energy investments, though it dwarfed all of the fund's previous end-of-quarter positions in Southwest Gas. Citadel has reported larger stakes in some multi-utilities than in pure-play gas utility operators, historical data shows.

Israel Englander's Millennium Management LLC and Steven Cohen's Point72 Asset Management LP were also among the top 15 net purchasers of Southwest Gas stock. Millennium had nearly 277,000 shares, while Point72 held more than 78,000 shares at year-end.

Snapshot ahead of gas utility stock surge

Despite those purchases, Southwest Gas posted the largest net share sales by institutional investors among a group of nine gas utility operators selected by S&P Global Market Intelligence. Ranking second for net stock sales was South Jersey Industries Inc.

The outflow of institutional money came ahead of a stock price surge for the Garden State gas distributor following its $8.1 billion acquisition by Infrastructure Investments Fund. Shares have rocketed as much as 34.5% year-to-date.

Investment management giant State Street Global Advisors Inc. was South Jersey Industries' biggest net seller by far. State Street had slashed its position in South Jersey Industries by more than 7 million shares at year-end but still ranked as its second-largest investor. BlackRock Inc., Brookfield Asset Management Inc. and The Goldman Sachs Group Inc. were the top three net purchasers.

It is unclear what positions the investors held in South Jersey Industries and other gas utilities when the company announced the buyout Feb. 24. However, many institutional investors were at least positioned at the end of 2021 to reap the benefits of the subsequent gas utility stock price bounce.

Atmos Energy Corp. led the group with 7.1 million in net share purchases among institutional investors, followed by New Jersey Resources Corp., Spire Inc. and One Gas Inc. Northwest Natural Holding Co. and Chesapeake Utilities Corp. saw marginal net share purchases by institutional buyers, while the investor class trimmed its net ownership in UGI Corp.

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