After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Dominion Energy Inc. (NYSE:D).
Is Dominion Energy a good stock to buy now? Dominion Energy Inc. (NYSE:D) investors should be aware of an increase in activity from the world's largest hedge funds in recent months. Dominion Energy Inc. (NYSE:D) was in 37 hedge funds' portfolios at the end of September. The all time high for this statistic is 45. Our calculations also showed that D isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 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.
Stuart Zimmer of Zimmer Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind let's review the key hedge fund action encompassing Dominion Energy Inc. (NYSE:D).
Do Hedge Funds Think D Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in D over the last 21 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Dominion Energy Inc. (NYSE:D) was held by Zimmer Partners, which reported holding $204 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $121.2 million position. Other investors bullish on the company included Millennium Management, D E Shaw, and AQR Capital Management. In terms of the portfolio weights assigned to each position Zimmer Partners allocated the biggest weight to Dominion Energy Inc. (NYSE:D), around 3.16% of its 13F portfolio. Ecofin Ltd is also relatively very bullish on the stock, designating 2.34 percent of its 13F equity portfolio to D.
With a general bullishness amongst the heavyweights, some big names were leading the bulls' herd. Zimmer Partners, managed by Stuart J. Zimmer, initiated the most outsized position in Dominion Energy Inc. (NYSE:D). Zimmer Partners had $204 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $121.2 million position during the quarter. The following funds were also among the new D investors: Ric Dillon's Diamond Hill Capital, Dmitry Balyasny's Balyasny Asset Management, and D. E. Shaw's D E Shaw.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Dominion Energy Inc. (NYSE:D) but similarly valued. These stocks are Colgate-Palmolive Company (NYSE:CL), FedEx Corporation (NYSE:FDX), Air Products & Chemicals, Inc. (NYSE:APD), Duke Energy Corporation (NYSE:DUK), Uber Technologies, Inc. (NYSE:UBER), The Sherwin-Williams Company (NYSE:SHW), and Activision Blizzard, Inc. (NASDAQ:ATVI). This group of stocks' market values resemble D's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CL,47,1540716,-3 FDX,71,2579950,25 APD,49,745333,12 DUK,36,756631,3 UBER,100,5978770,6 SHW,55,1779583,2 ATVI,93,4222431,-4 Average,64.4,2514773,5.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 64.4 hedge funds with bullish positions and the average amount invested in these stocks was $2515 million. That figure was $967 million in D's case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand Duke Energy Corporation (NYSE:DUK) is the least popular one with only 36 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 34.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and surpassed the market again by 16.4 percentage points. Unfortunately D wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); D investors were disappointed as the stock returned -3.8% since the end of September (through 12/18) 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 in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.