Is Exelon Corporation (NASDAQ:EXC) a good equity to bet on 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 Exelon Corporation (NASDAQ:EXC) ready to rally soon? Hedge funds are in a pessimistic mood. The number of bullish hedge fund bets shrunk by 1 lately. Our calculations also showed that EXC isn't among the 30 most popular stocks among hedge funds (see the video below). EXC was in 32 hedge funds' portfolios at the end of the second quarter of 2019. There were 33 hedge funds in our database with EXC holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a glance at the latest hedge fund action surrounding Exelon Corporation (NASDAQ:EXC).
How have hedgies been trading Exelon Corporation (NASDAQ:EXC)?
Heading into the third quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EXC over the last 16 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.
The largest stake in Exelon Corporation (NASDAQ:EXC) was held by AQR Capital Management, which reported holding $1021.6 million worth of stock at the end of March. It was followed by GLG Partners with a $257.6 million position. Other investors bullish on the company included Citadel Investment Group, Adage Capital Management, and Electron Capital Partners.
Because Exelon Corporation (NASDAQ:EXC) has witnessed declining sentiment from hedge fund managers, it's easy to see that there were a few hedge funds that decided to sell off their positions entirely in the second quarter. It's worth mentioning that Jonathan Barrett and Paul Segal's Luminus Management cut the biggest investment of the "upper crust" of funds followed by Insider Monkey, worth about $70.1 million in stock. Sara Nainzadeh's fund, Centenus Global Management, also dropped its stock, about $30.6 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds in the second quarter.
Let's now review hedge fund activity in other stocks similar to Exelon Corporation (NASDAQ:EXC). These stocks are Aon plc (NYSE:AON), Marriott International Inc (NASDAQ:MAR), American International Group Inc (NYSE:AIG), and Kimberly Clark Corporation (NYSE:KMB). This group of stocks' market caps are closest to EXC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AON,34,2527721,-5 MAR,27,2521738,2 AIG,41,2270404,4 KMB,40,1546551,4 Average,35.5,2216604,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.5 hedge funds with bullish positions and the average amount invested in these stocks was $2217 million. That figure was $1990 million in EXC's case. American International Group Inc (NYSE:AIG) is the most popular stock in this table. On the other hand Marriott International Inc (NASDAQ:MAR) is the least popular one with only 27 bullish hedge fund positions. Exelon Corporation (NASDAQ:EXC) is not the least popular stock in this group but hedge fund interest is still below average. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately EXC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EXC investors were disappointed as the stock returned 1.6% during the third quarter and slightly 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.