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 MGE Energy, Inc. (NASDAQ:MGEE).
MGE Energy, Inc. (NASDAQ:MGEE) was in 6 hedge funds' portfolios at the end of the first quarter of 2020. MGEE investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 9 hedge funds in our database with MGEE holdings at the end of the previous quarter. Our calculations also showed that MGEE 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.
To most stock holders, hedge funds are seen as slow, old investment vehicles of years past. While there are over 8000 funds with their doors open today, We choose to focus on the bigwigs of this group, approximately 850 funds. Most estimates calculate that this group of people have their hands on bulk of the hedge fund industry's total capital, and by monitoring their best stock picks, Insider Monkey has deciphered a number of investment strategies that have historically outrun Mr. Market. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_30621" align="aligncenter" width="391"] Cliff Asness of AQR Capital Management[/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 stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind we're going to analyze the key hedge fund action regarding MGE Energy, Inc. (NASDAQ:MGEE).
What have hedge funds been doing with MGE Energy, Inc. (NASDAQ:MGEE)?
At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MGEE over the last 18 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 MGE Energy, Inc. (NASDAQ:MGEE) was held by Renaissance Technologies, which reported holding $29.2 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $5.1 million position. Other investors bullish on the company included AQR Capital Management, D E Shaw, and PDT Partners. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to MGE Energy, Inc. (NASDAQ:MGEE), around 0.06% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to MGEE.
Due to the fact that MGE Energy, Inc. (NASDAQ:MGEE) has faced falling interest from the aggregate hedge fund industry, we can see that there were a few hedge funds who were dropping their entire stakes in the first quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dropped the biggest position of the 750 funds followed by Insider Monkey, totaling about $1.8 million in stock. Brandon Haley's fund, Holocene Advisors, also sold off its stock, about $1.1 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds in the first quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as MGE Energy, Inc. (NASDAQ:MGEE) but similarly valued. We will take a look at Ra Pharmaceuticals, Inc. (NASDAQ:RARX), Penske Automotive Group, Inc. (NYSE:PAG), Cloudera, Inc. (NYSE:CLDR), and Atlantica Sustainable Infrastructure plc (NASDAQ:AY). All of these stocks' market caps are similar to MGEE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RARX,34,890266,6 PAG,19,69005,-10 CLDR,26,583741,4 AY,13,77287,-3 Average,23,405075,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $405 million. That figure was $39 million in MGEE's case. Ra Pharmaceuticals, Inc. (NASDAQ:RARX) is the most popular stock in this table. On the other hand Atlantica Sustainable Infrastructure plc (NASDAQ:AY) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks MGE Energy, Inc. (NASDAQ:MGEE) is even less popular than AY. Hedge funds dodged a bullet by taking a bearish stance towards MGEE. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately MGEE wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); MGEE investors were disappointed as the stock returned 3.7% during the second quarter (through June 10th) 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.