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In this article we will take a look at whether hedge funds think Dominion Energy Inc. (NYSE:D) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is D stock a buy or sell? Dominion Energy Inc. (NYSE:D) has experienced an increase in support from the world's most elite money managers in recent months. Dominion Energy Inc. (NYSE:D) was in 47 hedge funds' portfolios at the end of December. The all time high for this statistic is 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 37 hedge funds in our database with D positions at the end of the third quarter. Our calculations also showed that D isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Zilvinas Mecelis of Covalis Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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 (or at the end of this article).Now we're going to view the latest hedge fund action encompassing Dominion Energy Inc. (NYSE:D).
Do Hedge Funds Think D Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in D over the last 22 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in Dominion Energy Inc. (NYSE:D) was held by Millennium Management, which reported holding $213.1 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $197 million position. Other investors bullish on the company included D E Shaw, Diamond Hill Capital, and Adage Capital Management. In terms of the portfolio weights assigned to each position Covalis Capital allocated the biggest weight to Dominion Energy Inc. (NYSE:D), around 9.72% of its 13F portfolio. Coann Capital is also relatively very bullish on the stock, designating 9.08 percent of its 13F equity portfolio to D.
As one would reasonably expect, key money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, assembled the largest position in Dominion Energy Inc. (NYSE:D). Point72 Asset Management had $83.6 million invested in the company at the end of the quarter. Zilvinas Mecelis's Covalis Capital also initiated a $26.6 million position during the quarter. The other funds with brand new D positions are Matthew Davis's Coann Capital, Paul Marshall and Ian Wace's Marshall Wace LLP, and Andrew Weiss's Weiss Asset Management.
Let's check out hedge fund activity in other stocks similar to Dominion Energy Inc. (NYSE:D). These stocks are Air Products & Chemicals, Inc. (NYSE:APD), Norfolk Southern Corp. (NYSE:NSC), Spotify Technology S.A. (NYSE:SPOT), General Motors Company (NYSE:GM), Marsh & McLennan Companies, Inc. (NYSE:MMC), VMware, Inc. (NYSE:VMW), and Atlassian Corporation Plc (NASDAQ:TEAM). This group of stocks' market valuations resemble D's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APD,50,1282433,1 NSC,44,783686,-3 SPOT,48,2688846,4 GM,70,6332871,10 MMC,43,1747012,8 VMW,35,405815,4 TEAM,69,4932963,21 Average,51.3,2596232,6.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 51.3 hedge funds with bullish positions and the average amount invested in these stocks was $2596 million. That figure was $1507 million in D's case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand VMware, Inc. (NYSE:VMW) is the least popular one with only 35 bullish hedge fund positions. Dominion Energy Inc. (NYSE:D) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for D is 57.1. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and surpassed the market again by 0.8 percentage points. Unfortunately D wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); D investors were disappointed as the stock returned -1.6% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.