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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Dominion Energy Inc. (NYSE:D) changed recently.
Dominion Energy Inc. (NYSE:D) was in 34 hedge funds' portfolios at the end of June. The all time high for this statistic is 47. D shareholders have witnessed a decrease in support from the world's most elite money managers in recent months. There were 39 hedge funds in our database with D holdings at the end of March. Our calculations also showed that D isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Israel Englander of Millennium Management
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 take a glance at the fresh hedge fund action surrounding Dominion Energy Inc. (NYSE:D).
Do Hedge Funds Think D Is A Good Stock To Buy Now?
At Q2's end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards D over the last 24 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Dominion Energy Inc. (NYSE:D) was held by D E Shaw, which reported holding $284.5 million worth of stock at the end of June. It was followed by Diamond Hill Capital with a $270.5 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and AQR Capital Management. In terms of the portfolio weights assigned to each position Yaupon Capital allocated the biggest weight to Dominion Energy Inc. (NYSE:D), around 2.76% of its 13F portfolio. Beech Hill Partners is also relatively very bullish on the stock, setting aside 1.52 percent of its 13F equity portfolio to D.
Due to the fact that Dominion Energy Inc. (NYSE:D) has experienced falling interest from the smart money, it's easy to see that there were a few hedgies who were dropping their entire stakes by the end of the second quarter. Intriguingly, Zilvinas Mecelis's Covalis Capital dropped the biggest investment of all the hedgies followed by Insider Monkey, comprising close to $12.5 million in stock, and John Overdeck and David Siegel's Two Sigma Advisors was right behind this move, as the fund sold off about $7.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 5 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Dominion Energy Inc. (NYSE:D) but similarly valued. We will take a look at Ford Motor Company (NYSE:F), ICICI Bank Limited (NYSE:IBN), Waste Management, Inc. (NYSE:WM), Eaton Corporation plc (NYSE:ETN), Workday Inc (NYSE:WDAY), Itau Unibanco Holding SA (NYSE:ITUB), and Ecolab Inc. (NYSE:ECL). This group of stocks' market values resemble D's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position F,55,2106196,6 IBN,28,2473600,-3 WM,39,3600334,7 ETN,40,1062179,-9 WDAY,72,5187481,3 ITUB,16,431689,4 ECL,48,2773469,6 Average,42.6,2519278,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.6 hedge funds with bullish positions and the average amount invested in these stocks was $2519 million. That figure was $1262 million in D's case. Workday Inc (NYSE:WDAY) is the most popular stock in this table. On the other hand Itau Unibanco Holding SA (NYSE:ITUB) is the least popular one with only 16 bullish hedge fund positions. Dominion Energy Inc. (NYSE:D) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for D is 37.8. 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 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 surpassed the market again by 4.4 percentage points. Unfortunately D wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); D investors were disappointed as the stock returned -1.2% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.