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Hedge Funds Are Betting On The Southern Company (SO)

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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded The Southern Company (NYSE:SO) based on those filings.

Is The Southern Company (NYSE:SO) ready to rally soon? The smart money was becoming more confident. The number of bullish hedge fund positions inched up by 2 recently. The Southern Company (NYSE:SO) was in 37 hedge funds' portfolios at the end of June. The all time high for this statistic is 38. Our calculations also showed that SO isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 35 hedge funds in our database with SO 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.

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Lee Ainslie's Top 10 Stock Picks

Lee Ainslie of Maverick Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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. Now let's go over the recent hedge fund action regarding The Southern Company (NYSE:SO).

Do Hedge Funds Think SO Is A Good Stock To Buy Now?

At second quarter's end, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the first quarter of 2020. By comparison, 38 hedge funds held shares or bullish call options in SO a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Zimmer Partners held the most valuable stake in The Southern Company (NYSE:SO), which was worth $133.1 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $91.2 million worth of shares. Millennium Management, D E Shaw, and ExodusPoint Capital 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 Zimmer Partners allocated the biggest weight to The Southern Company (NYSE:SO), around 1.79% of its 13F portfolio. Te Ahumairangi Investment Management is also relatively very bullish on the stock, earmarking 1.26 percent of its 13F equity portfolio to SO.

With a general bullishness amongst the heavyweights, key money managers have jumped into The Southern Company (NYSE:SO) headfirst. Stevens Capital Management, managed by Matthew Tewksbury, initiated the biggest position in The Southern Company (NYSE:SO). Stevens Capital Management had $1.1 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital) also made a $0.9 million investment in the stock during the quarter. The following funds were also among the new SO investors: Qing Li's Sciencast Management, Lee Ainslie's Maverick Capital, and Minhua Zhang's Weld Capital Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as The Southern Company (NYSE:SO) but similarly valued. These stocks are Air Products & Chemicals, Inc. (NYSE:APD), Analog Devices, Inc. (NASDAQ:ADI), Stellantis N.V. (NYSE:STLA), Banco Santander (Brasil) SA (NYSE:BSBR), Roku, Inc. (NASDAQ:ROKU), Boston Scientific Corporation (NYSE:BSX), and Regeneron Pharmaceuticals Inc (NASDAQ:REGN). This group of stocks' market valuations are similar to SO's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APD,40,456440,8 ADI,62,5796275,12 STLA,28,844328,7 BSBR,7,9630,2 ROKU,61,5631958,-2 BSX,51,3029136,7 REGN,48,1595301,9 Average,42.4,2480438,6.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.4 hedge funds with bullish positions and the average amount invested in these stocks was $2480 million. That figure was $606 million in SO's case. Analog Devices, Inc. (NASDAQ:ADI) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 7 bullish hedge fund positions. The Southern Company (NYSE:SO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SO is 63.5. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. A small number of hedge funds were also right about betting on SO as the stock returned 3.4% since the end of the second quarter (through 10/11) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.