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Climate Activist Hedge Fund Engine No. 1 Is Buying These Energy Stocks

·9 min read
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In this article, we discuss the 10 energy stocks climate activist hedge fund Engine No. 1 is buying. If you want to skip our detailed analysis of these stocks, go directly to Climate Activist Hedge Fund Engine No. 1 Is Buying These 5 Energy Stocks.

Climate activism and responsible environmental business practices are now heading to Wall Street and big energy companies have already started to feel the heat of a new kind of investment strategy that links capital infusion to energy transition and alternative energy development plans. Engine No. 1, the California-based climate activist hedge fund managed by Chris James, has nearly doubled the assets under management from $272 million at the end of the first quarter of 2021 to nearly $363 million at the end of June, latest filings show. 

Engine No. 1 had been in the news during May and June this year after it managed to win three board seats at Exxon Mobil Corporation (NYSE: XOM) in a public bid aimed at forcing the energy firm to accelerate energy transition plans. On September 3, business news publication The Wall Street Journal reported, citing sources, that the hedge fund was planning a similar coup at Chevron Corporation (NYSE: CVX). According to the report, meetings had been held between Chevron Corporation (NYSE: CVX) and Engine representatives over the matter. 

Some of the top holdings of Engine No. 1 at the end of the second quarter of 2021 were Shopify Inc. (NYSE: SHOP), Square, Inc. (NYSE: SQ), Microsoft Corporation (NASDAQ: MSFT), and Apple Inc. (NASDAQ: AAPL), among others. As the hedge fund aggressively pursues climate activism through investments, it is worth noting that the net inflows into sustainable funds increased to over $50 billion in 2020 from $21 billion in 2019, according to a study by financial services firm Morningstar.  

The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Climate Activist Hedge Fund Engine No. 1 Is Buying These Energy Stocks
Climate Activist Hedge Fund Engine No. 1 Is Buying These Energy Stocks

Our Methodology

With this context in mind, here is our list of the 10 energy stocks climate activist hedge fund Engine No. 1 is buying. They were picked keeping in mind the portfolio of Engine No. 1 at the end of the second quarter of 2021.

The hedge fund sentiment around the stocks was gauged using data of 873 hedge funds tracked by Insider Monkey. The list is compiled according to the value of the holding in the Engine No. 1 portfolio.

The analyst ratings of the companies and their basic business fundamentals are also discussed to provide readers with some more context for their investment decisions. 

Climate Activist Hedge Fund Engine No. 1 Is Buying These Energy Stocks

10. The Southern Company (NYSE: SO)

Number of Hedge Fund Holders: 37

The Southern Company (NYSE: SO) is a Georgia-based company that generates and sells electricity. It is placed tenth on our list of 10 energy stocks climate activist hedge fund Engine No. 1 is buying. Latest data shows that Engine No. 1 owned 3,379 shares in the company at the end of June 2021 worth $204,000, representing 0.05% of the portfolio. 

On August 30, investment advisory Mizuho maintained an Underperform rating on The Southern Company (NYSE: SO) stock and raised the price target to $60 from $57. Paul Fremont, an analyst at the advisory, issued the ratings update. 

At the end of the second quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $606 million in The Southern Company (NYSE: SO), up from 35 in the previous quarter worth $464 million.

9. CSX Corporation (NASDAQ: CSX)

Number of Hedge Fund Holders: 56

CSX Corporation (NASDAQ: CSX) is ranked ninth on our list of 10 energy stocks climate activist hedge fund Engine No. 1 is buying. The firm operates as a diversified industrial company with interests in the electricity generating business and is headquartered in Florida. According to the securities filings, Engine No. 1 owned 7,259 shares in the company at the end of June 2021 worth $233,000, representing 0.06% of the portfolio. 

On July 22, investment advisory RBC Capital maintained an Outperform rating on CSX Corporation (NASDAQ: CSX) stock and raised the price target to $37 from $36, underlining that the firm reported a solid and better than expected second quarter. 

Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Soroban Capital Partners is a leading shareholder in CSX Corporation (NASDAQ: CSX) with 32 million shares worth more than $1 billion.

In addition to Exxon Mobil Corporation (NYSE: XOM), Chevron Corporation (NYSE: CVX), Shopify Inc. (NYSE: SHOP), Square, Inc. (NYSE: SQ), Microsoft Corporation (NASDAQ: MSFT), and Apple Inc. (NASDAQ: AAPL), CSX Corporation (NASDAQ: CSX) is one of the stocks getting the attention of elite hedge funds. 

8. Duke Energy Corporation (NYSE: DUK)

Number of Hedge Fund Holders: 36  

Duke Energy Corporation (NYSE: DUK) is a North Carolina-based energy company. It is ranked eighth on our list of 10 energy stocks climate activist hedge fund Engine No. 1 is buying. 13F filings reveal that Engine No.1 owned 2,452 shares in the company at the end of the second quarter of 2021 worth $242,000, representing 0.06% of the portfolio. 

On August 18, investment advisory Mizuho maintained a Neutral rating on Duke Energy Corporation (NYSE: DUK) stock and raised the price target to $109 from $105, appreciating the second quarter earnings report of the firm. 

At the end of the second quarter of 2021, 36 hedge funds in the database of Insider Monkey held stakes worth $566 million in Duke Energy Corporation (NYSE: DUK), up from 34 in the preceding quarter worth $602 million. 

Alongside Exxon Mobil Corporation (NYSE: XOM), Chevron Corporation (NYSE: CVX), Shopify Inc. (NYSE: SHOP), Square, Inc. (NYSE: SQ), Microsoft Corporation (NASDAQ: MSFT), and Apple Inc. (NASDAQ: AAPL), Duke Energy Corporation (NYSE: DUK) has also been attracting the attention of investors. 

7. ConocoPhillips (NYSE: COP)

Number of Hedge Fund Holders: 50

ConocoPhillips (NYSE: COP) is placed seventh on our list of 10 energy stocks climate activist hedge fund Engine No. 1 is buying. The company operates as an oil and gas developer and is headquartered in Texas. Regulatory filings reveal that Engine No. 1 owned 4,310 shares in the company at the end of June 2021 worth $262,000, representing 0.07% of the portfolio. 

On July 23, investment advisory Piper Sandler maintained an Overweight rating on ConocoPhillips (NYSE: COP) stock and raised the price target to $80 from $69, noting that the second quarter results in the energy sector were unquestionably positive. 

At the end of the second quarter of 2021, 50 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in ConocoPhillips (NYSE: COP), down from 51 in the previous quarter worth $1.2 billion.

Exxon Mobil Corporation (NYSE: XOM), Chevron Corporation (NYSE: CVX), Shopify Inc. (NYSE: SHOP), Square, Inc. (NYSE: SQ), Microsoft Corporation (NASDAQ: MSFT), and Apple Inc. (NASDAQ: AAPL) are some of the top stocks in the Engine No. 1 portfolio, just like ConocoPhillips (NYSE: COP). 

In its Q1 2021 investor letter, ClearBridge Investments highlighted a few stocks and ConocoPhillips (NYSE: COP) was one of them. Here is what the fund said:

“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. We added to low-cost, high-quality energy names (including) ConocoPhillips. We are positive on the company’s strong balance sheets, competitive positions and exposure to an economic recovery.”

6. General Electric Company (NYSE: GE)

Number of Hedge Fund Holders: 67

General Electric Company (NYSE: GE) is ranked sixth on our list of 10 energy stocks climate activist hedge fund Engine No. 1 is buying. The company operates as a diversified high-tech industrial firm and is headquartered in Boston. Latest data shows that Engine No.1 owned 28,054 shares in the company at the end of the second quarter of 2021 worth $378,000, representing 0.1% of the portfolio.  

On August 11, investment advisory Citi maintained a Buy rating on General Electric Company (NYSE: GE) stock and adjusted the price target to $136 to account for a reverse stock split. Andrew Kaplowitz, an analyst at the firm, issued the ratings update. 

At the end of the second quarter of 2021, 67 hedge funds in the database of Insider Monkey held stakes worth $6.08 billion in General Electric Company (NYSE: GE), down from 68 in the previous quarter worth $6.16 billion.

Exxon Mobil Corporation (NYSE: XOM), Chevron Corporation (NYSE: CVX), Shopify Inc. (NYSE: SHOP), Square, Inc. (NYSE: SQ), Microsoft Corporation (NASDAQ: MSFT), and Apple Inc. (NASDAQ: AAPL) are some of the best stocks in the Engine No. 1 portfolio, along with General Electric Company (NYSE: GE). 

In its Q1 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and General Electric Company (NYSE: GE) was one of them. Here is what the fund said:

 “General Electric is outperforming our expectations for 2021 as the economic recovery is occurring faster than expected. We are particularly pleased with its free cash flow generation. We are happy to own it in our portfolio.”

To see the rest of the stocks in this list click Climate Activist Hedge Fund Engine No. 1 Is Buying These 5 Energy Stocks.

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Disclosure. None. Climate Activist Hedge Fund Engine No. 1 Is Buying These Energy Stocks is originally published on Insider Monkey.