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How Did Duke Energy Corporation (DUK) Compare Against Top Hedge Fund Stocks in 2019?

Nina Todic

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds. What do these smart investors think about Duke Energy Corporation (NYSE:DUK)?

Duke Energy Corporation (NYSE:DUK) has seen a decrease in hedge fund sentiment in recent months. DUK was in 28 hedge funds' portfolios at the end of the third quarter of 2019. There were 32 hedge funds in our database with DUK positions at the end of the previous quarter. Our calculations also showed that DUK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_340081" align="aligncenter" width="450"] Phill Gross of Adage Capital Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to analyze the new hedge fund action regarding Duke Energy Corporation (NYSE:DUK).

What does smart money think about Duke Energy Corporation (NYSE:DUK)?

At Q3's end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DUK over the last 17 quarters. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

The largest stake in Duke Energy Corporation (NYSE:DUK) was held by Renaissance Technologies, which reported holding $704 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $126.1 million position. Other investors bullish on the company included Adage Capital Management, AQR Capital Management, and Electron Capital Partners. In terms of the portfolio weights assigned to each position Electron Capital Partners allocated the biggest weight to Duke Energy Corporation (NYSE:DUK), around 10.58% of its 13F portfolio. Blackstart Capital is also relatively very bullish on the stock, dishing out 6.74 percent of its 13F equity portfolio to DUK.

Judging by the fact that Duke Energy Corporation (NYSE:DUK) has experienced falling interest from hedge fund managers, we can see that there lies a certain "tier" of hedgies that decided to sell off their positions entirely in the third quarter. Interestingly, Dmitry Balyasny's Balyasny Asset Management cut the largest stake of the 750 funds followed by Insider Monkey, totaling an estimated $64.2 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund dumped about $36.1 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds in the third quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Duke Energy Corporation (NYSE:DUK) but similarly valued. We will take a look at The Bank of Nova Scotia (NYSE:BNS), BlackRock, Inc. (NYSE:BLK), Intuit Inc. (NASDAQ:INTU), and Westpac Banking Corporation (NYSE:WBK). This group of stocks' market caps are similar to DUK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BNS,15,677866,-1 BLK,42,1040933,-1 INTU,47,2011283,1 WBK,4,42624,1 Average,27,943177,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $943 million. That figure was $1317 million in DUK's case. Intuit Inc. (NASDAQ:INTU) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. Duke Energy Corporation (NYSE:DUK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately DUK wasn't nearly as popular as these 20 stocks and hedge funds that were betting on DUK were disappointed as the stock returned 9% in 2019 (through December 23rd) 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 many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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