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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Eversource Energy (NYSE:ES).
Is Eversource Energy (NYSE:ES) a first-rate investment now? The best stock pickers were turning bullish. The number of bullish hedge fund bets increased by 2 in recent months. Eversource Energy (NYSE:ES) was in 26 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 28. Our calculations also showed that ES isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 24 hedge funds in our database with ES holdings at the end of March.
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 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ian Wace of Marshall Wace
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla 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. Keeping this in mind let's view the recent hedge fund action encompassing Eversource Energy (NYSE:ES).
Do Hedge Funds Think ES Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in ES over the last 24 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Zimmer Partners was the largest shareholder of Eversource Energy (NYSE:ES), with a stake worth $105.9 million reported as of the end of June. Trailing Zimmer Partners was D E Shaw, which amassed a stake valued at $72.5 million. Millennium Management, Point72 Asset Management, and Citadel Investment Group 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 Coann Capital allocated the biggest weight to Eversource Energy (NYSE:ES), around 4.82% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, setting aside 1.43 percent of its 13F equity portfolio to ES.
Now, some big names have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, assembled the largest position in Eversource Energy (NYSE:ES). Point72 Asset Management had $52.6 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $5.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Renaissance Technologies, and Ray Dalio's Bridgewater Associates.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Eversource Energy (NYSE:ES) but similarly valued. These stocks are Interactive Brokers Group, Inc. (NASDAQ:IBKR), HubSpot Inc (NYSE:HUBS), Coca-Cola Europacific Partners PLC (NASDAQ:CCEP), Deutsche Bank Aktiengesellschaft (NYSE:DB), Laboratory Corp. of America Holdings (NYSE:LH), Hess Corporation (NYSE:HES), and Tyson Foods, Inc. (NYSE:TSN). This group of stocks' market values match ES's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IBKR,36,1481835,5 HUBS,54,2674601,8 CCEP,31,1300875,6 DB,20,1860258,4 LH,53,2555270,-1 HES,31,615716,5 TSN,33,743751,5 Average,36.9,1604615,4.6 [/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 $1605 million. That figure was $391 million in ES's case. HubSpot Inc (NYSE:HUBS) is the most popular stock in this table. On the other hand Deutsche Bank Aktiengesellschaft (NYSE:DB) is the least popular one with only 20 bullish hedge fund positions. Eversource Energy (NYSE:ES) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ES is 43.7. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. A small number of hedge funds were also right about betting on ES as the stock returned 8.4% since the end of the second quarter (through 10/15) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.