The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of Consolidated Edison, Inc. (NYSE:ED).
Is ED a good stock to buy now? Consolidated Edison, Inc. (NYSE:ED) investors should be aware of a decrease in hedge fund interest recently. Consolidated Edison, Inc. (NYSE:ED) was in 18 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 31. Our calculations also showed that ED 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.
Phillip Gross of Adage Capital
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 we're going to review the fresh hedge fund action encompassing Consolidated Edison, Inc. (NYSE:ED).
Do Hedge Funds Think ED Is A Good Stock To Buy Now?
At Q3's end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -42% from the second quarter of 2020. On the other hand, there were a total of 24 hedge funds with a bullish position in ED a year ago. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Consolidated Edison, Inc. (NYSE:ED), with a stake worth $142.1 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $80.3 million. Lansdowne Partners, D E Shaw, and Adage Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Lansdowne Partners allocated the biggest weight to Consolidated Edison, Inc. (NYSE:ED), around 3.08% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.14 percent of its 13F equity portfolio to ED.
Due to the fact that Consolidated Edison, Inc. (NYSE:ED) has faced declining sentiment from the smart money, it's easy to see that there exists a select few fund managers that decided to sell off their positions entirely last quarter. Intriguingly, Stuart J. Zimmer's Zimmer Partners dropped the biggest investment of the "upper crust" of funds tracked by Insider Monkey, totaling an estimated $28.3 million in stock. John Overdeck and David Siegel's fund, Two Sigma Advisors, also cut its stock, about $11.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 13 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Consolidated Edison, Inc. (NYSE:ED). We will take a look at Parker-Hannifin Corporation (NYSE:PH), Liberty Broadband Corp (NASDAQ:LBRDK), NIO Inc. (NYSE:NIO), Microchip Technology Incorporated (NASDAQ:MCHP), AFLAC Incorporated (NYSE:AFL), Stanley Black & Decker, Inc. (NYSE:SWK), and Fresenius Medical Care AG & Co. (NYSE:FMS). This group of stocks' market valuations are closest to ED's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PH,51,2050679,12 LBRDK,56,4166611,-2 NIO,35,1400815,5 MCHP,35,629361,2 AFL,34,479100,0 SWK,38,786276,5 FMS,9,14151,3 Average,36.9,1360999,3.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.9 hedge funds with bullish positions and the average amount invested in these stocks was $1361 million. That figure was $387 million in ED's case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. (NYSE:FMS) is the least popular one with only 9 bullish hedge fund positions. Consolidated Edison, Inc. (NYSE:ED) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ED is 19. 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 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately ED wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ED investors were disappointed as the stock returned -6.1% since the end of September (through 12/14) 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.