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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Evergy, Inc. (NYSE:EVRG).
Evergy, Inc. (NYSE:EVRG) was in 30 hedge funds' portfolios at the end of the first quarter of 2020. EVRG has experienced an increase in enthusiasm from smart money in recent months. There were 25 hedge funds in our database with EVRG positions at the end of the previous quarter. Our calculations also showed that EVRG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 S&P 500 ETFs by 58 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 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.
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Paul Marshall of Marshall Wace[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a look at the latest hedge fund action surrounding Evergy, Inc. (NYSE:EVRG).
Hedge fund activity in Evergy, Inc. (NYSE:EVRG)
At Q1's end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EVRG over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Evergy, Inc. (NYSE:EVRG) was held by Renaissance Technologies, which reported holding $404.5 million worth of stock at the end of September. It was followed by Adage Capital Management with a $53 million position. Other investors bullish on the company included Citadel Investment Group, AQR Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Blackstart Capital allocated the biggest weight to Evergy, Inc. (NYSE:EVRG), around 11.83% of its 13F portfolio. Yaupon Capital is also relatively very bullish on the stock, dishing out 7.24 percent of its 13F equity portfolio to EVRG.
As industrywide interest jumped, specific money managers have jumped into Evergy, Inc. (NYSE:EVRG) headfirst. Blackstart Capital, managed by Brian Olson, Baehyun Sung, and Jamie Waters, established the most valuable position in Evergy, Inc. (NYSE:EVRG). Blackstart Capital had $6.3 million invested in the company at the end of the quarter. Charles Davidson and Joseph Jacobs's Wexford Capital also initiated a $6.1 million position during the quarter. The following funds were also among the new EVRG investors: George Soros's Soros Fund Management, Steve Pattyn's Yaupon Capital, and Sara Nainzadeh's Centenus Global Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Evergy, Inc. (NYSE:EVRG) but similarly valued. We will take a look at D.R. Horton, Inc. (NYSE:DHI), Western Digital Corporation (NASDAQ:WDC), Extra Space Storage, Inc. (NYSE:EXR), and Energy Transfer L.P. (NYSE:ET). This group of stocks' market caps are closest to EVRG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DHI,65,1265515,14 WDC,45,560147,-4 EXR,16,186130,-12 ET,33,421900,-3 Average,39.75,608423,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.75 hedge funds with bullish positions and the average amount invested in these stocks was $608 million. That figure was $757 million in EVRG's case. D.R. Horton, Inc. (NYSE:DHI) is the most popular stock in this table. On the other hand Extra Space Storage, Inc. (NYSE:EXR) is the least popular one with only 16 bullish hedge fund positions. Evergy, Inc. (NYSE:EVRG) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately EVRG wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); EVRG investors were disappointed as the stock returned 13% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.