Is ED Stock A Buy or Sell?
In this article you are going to find out whether hedge funds think Consolidated Edison, Inc. (NYSE:ED) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is ED stock a buy? Consolidated Edison, Inc. (NYSE:ED) was in 32 hedge funds' portfolios at the end of December. The all time high for this statistic is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ED investors should be aware of an increase in activity from the world's largest hedge funds in recent months. There were 18 hedge funds in our database with ED holdings at the end of September. Our calculations also showed that ED 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.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Now let's view the new hedge fund action encompassing Consolidated Edison, Inc. (NYSE:ED).
Do Hedge Funds Think ED Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 78% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in ED over the last 22 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Israel Englander's Millennium Management has the largest position in Consolidated Edison, Inc. (NYSE:ED), worth close to $76.9 million, accounting for 0.1% of its total 13F portfolio. On Millennium Management's heels is AQR Capital Management, managed by Cliff Asness, which holds a $75.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions encompass Frank Fu's CaaS Capital, Suzi Nutton (CEO)'s Lansdowne Partners and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Lansdowne Partners allocated the biggest weight to Consolidated Edison, Inc. (NYSE:ED), around 1.7% of its 13F portfolio. Jones Road Capital Management is also relatively very bullish on the stock, earmarking 1.22 percent of its 13F equity portfolio to ED.
As aggregate interest increased, specific money managers have jumped into Consolidated Edison, Inc. (NYSE:ED) headfirst. CaaS Capital, managed by Frank Fu, created the most valuable position in Consolidated Edison, Inc. (NYSE:ED). CaaS Capital had $52.9 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also made a $4.3 million investment in the stock during the quarter. The following funds were also among the new ED investors: Nicholas Bagnall's Te Ahumairangi Investment Management, George Soros's Soros Fund Management, and Michael Gelband's ExodusPoint Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Consolidated Edison, Inc. (NYSE:ED) but similarly valued. These stocks are The Kroger Co. (NYSE:KR), Fortinet Inc (NASDAQ:FTNT), Cerner Corporation (NASDAQ:CERN), Alexandria Real Estate Equities Inc (NYSE:ARE), BeiGene, Ltd. (NASDAQ:BGNE), Yum China Holdings, Inc. (NYSE:YUMC), and Take-Two Interactive Software, Inc. (NASDAQ:TTWO). This group of stocks' market caps match ED's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KR,36,2381034,1 FTNT,32,1220671,-4 CERN,34,834428,0 ARE,14,198522,-11 BGNE,21,4659391,8 YUMC,39,1317170,0 TTWO,55,1513003,3 Average,33,1732031,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1732 million. That figure was $393 million in ED's case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Alexandria Real Estate Equities Inc (NYSE:ARE) is the least popular one with only 14 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 62. 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 12.2% in 2021 through April 12th and surpassed the market again by 1.5 percentage points. Unfortunately ED wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); ED investors were disappointed as the stock returned 5.4% since the end of December (through 4/12) 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.
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