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Matthew Davis’ Coann Capital Portfolio: Top 10 Stock Picks

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·9 min read
In this article:
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  • EXC
  • ED
  • NIMC
  • EVRG
  • OGE
  • SO
  • XEL

In this article, we discuss the top 10 stock picks of Matthew Davis’ Coann Capital. If you want to skip our detailed analysis of these stocks, go directly to Matthew Davis' Coann Capital Portfolio: Top 5 Stock Picks.

Matthew Davis is the portfolio manager at Coann Capital, a New York-based investment management firm. Davis manages a portfolio worth $103.6 million at Coann Capital, as of the 13F filings for the third quarter. Davis’ investment portfolio is highly concentrated in the utilities sector, with the largest holding being Essential Utilities, Inc. (NYSE:WTRG), a company offering drinking water and wastewater management infrastructure. Coann Capital owns 202,213 shares in Essential Utilities, Inc. (NYSE:WTRG), worth $9.3 million as of Q3.

Davis completed his Bachelor’s in economics from the University of Colgate in 2007, and joined Credit Suisse Group AG (NYSE:CS) the same year as an associate. In 2015, he was promoted as vice president of utilities and power equity research. Davis concluded his tenure as a VP at Credit Suisse Group AG (NYSE:CS) after six months, when he joined Carlson Capital, a Texas-based alternative asset manager, in June 2015 as a senior analyst. Davis was promoted to portfolio manager at Carlson Capital in January 2019. He switched to Coann Capital in 2020 as the portfolio manager, where he applied his extensive experience in the utilities, power, and energy sectors to manage a successful portfolio.

As of Q3, the top stocks in Davis’ portfolio at Coann Capital include Exelon Corporation (NASDAQ:EXC), Consolidated Edison, Inc. (NYSE:ED), Xcel Energy Inc. (NASDAQ:XEL), and The Southern Company (NYSE:SO), among others discussed in detail below.

Matthew Davis' Coann Capital Portfolio: Top 10 Stock Picks
Matthew Davis' Coann Capital Portfolio: Top 10 Stock Picks

Our Methodology

Let’s take a look at the top 10 stock picks of Matthew Davis’ Coann Capital. We selected the top stocks from Davis’ Q3 portfolio, ranking them according to Coann Capital’s stake value in each holding. We have mentioned additional metrics such as analyst ratings, the hedge fund sentiment surrounding each stock, and Q3 earnings, to give an in-depth context to our readers.

Matthew Davis' Coann Capital Portfolio: Top Stock Picks

10. NiSource Inc. (NYSE:NI)

Coann Capital’s Stake Value: $7,046,000

Percentage of Coann Capital’s 13F Portfolio: 6.79%

Number of Hedge Fund Holders: 36

One of the largest utility companies in the United States, NiSource Inc. (NYSE:NI) is an Indiana-based fully regulated operation that provides natural gas and electricity to customers via Columbia Gas and NIPSCO, two local brands that NiSource Inc. (NYSE:NI) controls. NiSource Inc. (NYSE:NI) represents 6.79% of Coann Capital’s Q3 portfolio, with the investment firm holding a $7 million stake in the company.

On November 3, NiSource Inc. (NYSE:NI) reported its Q3 results. The EPS came in at $0.11, beating estimates by $0.01. At the end of June, 36 hedge funds monitored by the database of Insider Monkey reported owning stakes in NiSource Inc. (NYSE:NI), worth roughly $560 million.

NiSource Inc. (NYSE:NI) was upgraded from Neutral to Buy on October 12 by Goldman Sachs analyst Insoo Kim, who also raised the price target from $27 to $29. The analyst believes that NiSource Inc. (NYSE:NI) is an underappreciated stock, and the EPS growth potential is not reflected in its valuation, offering an attractive entry point.

In addition to Exelon Corporation (NASDAQ:EXC), Consolidated Edison, Inc. (NYSE:ED), Xcel Energy Inc. (NASDAQ:XEL), and The Southern Company (NYSE:SO), NiSource Inc. (NYSE:NI) is a top stock in Davis’ Q3 portfolio.

9. Evergy, Inc. (NYSE:EVRG)

Coann Capital’s Stake Value: $7,244,000

Percentage of Coann Capital’s 13F Portfolio: 6.98%

Number of Hedge Fund Holders: 21

Evergy, Inc. (NYSE:EVRG) is a Kansas-based electric company, which is classified as an American investor-owned utility (IOU). Evergy, Inc. (NYSE:EVRG) is serving residential, commercial, and industrial customers with 16,000 megawatts of power generation capacity via more than 40 power plants in Kansas and Missouri. The company has been involved in power generation, transmission, and distribution since 1882.

Coann Capital owns 116,471 shares in the company, with the Evergy, Inc. (NYSE:EVRG) stock representing 6.98% of its Q3 portfolio. At the end of June this year, 21 hedge funds in the database of Insider Monkey were bullish on Evergy, Inc. (NYSE:EVRG), down from 30 in the preceding quarter.

Evergy, Inc. (NYSE:EVRG) posted on November 3 its Q3 results. EPS in the period equaled $1.98, exceeding estimates by $0.21. Revenue for the quarter came in at $1.62 billion, beating estimated revenue by $34.82 million.

8. Exelon Corporation (NASDAQ:EXC)

Coann Capital’s Stake Value: $7,344,000

Percentage of Coann Capital’s 13F Portfolio: 7.08%

Number of Hedge Fund Holders: 35

Exelon Corporation (NASDAQ:EXC) runs the largest operation of American nuclear power plants, as well as the largest privately held nuclear power plants in the world. Based in Chicago, Illinois, Exelon Corporation (NASDAQ:EXC) serves almost 10 million customers and is one of the most prominent electric companies in the United States. Exelon Corporation (NASDAQ:EXC) stock represents 7.08% of Coann Capital’s investment portfolio as of September this year.

At the end of the second quarter, 35 hedge funds tracked by Insider Monkey’s database of elite funds reported owning stakes in Exelon Corporation (NASDAQ:EXC), down from 44 in the preceding quarter.

According to the Q3 results posted on November 3 by Exelon Corporation (NASDAQ:EXC), EPS for the period equaled $1.09, beating estimates by $0.01. Revenue for Q3 amounted to $8.91 billion, exceeding forecasted revenue by $437.09 million.

Mizuho analyst Paul Fremont raised the price target on Exelon Corporation (NASDAQ:EXC) on October 15 from $53 to $55, and kept a Buy rating on the shares. To incorporate the higher prices of gas and electricity, he increased his 2022 through 2024 Exelon Corporation (NASDAQ:EXC) estimates.

Here is what Heartland Advisors has to say about Exelon Corporation (NASDAQ:EXC) in its Q3 2021 investor letter:

“Power aid. A renewed interest in less-volatile industries and income-generating businesses helped propel less volatile names in areas such as Utilities. Our holdings in the sector were up modestly during the period and outperformed the benchmark on a relative basis, led by Exelon Corp (EXC).

The company is a large multi-state utility with regulated as well as unregulated operations. Following a strategic review, Exelon announced a plan this year to separate the two businesses. Since the time of the announcement, investors have gotten a clearer view into prospects of both operations and have seen improvements in results, and shares have appreciated. The decision and recent improvements, in our view, set the stage for a further re-rating of the company.

Based on our analysis, investors appear to be undervaluing Exelon’s two business lines under the current operating structure. We believe the regulated line has desirable transmission/distribution assets and strong opportunities for rate base growth. Meanwhile, the unregulated merchant power segment trades at less than 5x enterprise value/earnings before interest, taxes, depreciation, and amortization, which represents a steep discount to the average multiple for publicly traded power companies.

We also believe Exelon’s merchant business, with its nuclear fleet and an inventory of alternative energy assets, is poised to benefit from an increased emphasis on clean energy from the Biden administration.

With shares trading at a discount to our sum-of-the parts analysis, Exelon, in our view, remains a compelling opportunity relative to fully regulated utilities.”

7. Consolidated Edison, Inc. (NYSE:ED)

Coann Capital’s Stake Value: $7,751,000

Percentage of Coann Capital’s 13F Portfolio: 7.47%

Number of Hedge Fund Holders: 30

Consolidated Edison, Inc. (NYSE:ED) is an investor-owned energy company from Manhattan, offering electricity and gas services, renewable energy, and energy infrastructure to customers across New York City, Manhattan, Westchester County, and New Jersey via its subsidiaries. Consolidated Edison, Inc. (NYSE:ED) is a top stock in Davis’ Q3 portfolio, with Coann Capital holding 106,784 shares in Consolidated Edison, Inc. (NYSE:ED), worth $7.75 million, representing 7.47% of the firm’s 13F securities.

Julien Dumoulin-Smith from BofA, on October 18, downgraded Consolidated Edison, Inc. (NYSE:ED) from Neutral to Underperform, slashing the price target to $68 from $74.

On November 4, the Q3 EPS for Consolidated Edison, Inc. (NYSE:ED) came in at $1.41, missing estimates by -$0.07. Revenue for the quarter equaled $3.61 billion, exceeding estimates by $152.85 million.

Consolidated Edison, Inc. (NYSE:ED) declared a quarterly cash dividend of $0.775 on October 21, payable on December 15 to shareholders on record as of November 17.

At the end of the second quarter of 2021, 30 hedge funds whose activity is tracked by Insider Monkey, reported owning stakes in Consolidated Edison, Inc. (NYSE:ED) worth $533.4 million. This is comparable to 22 funds being long Consolidated Edison, Inc. (NYSE:ED) in the preceding quarter, with an approximate stake value of $196.6 million.

6. OGE Energy Corp. (NYSE:OGE)

Coann Capital’s Stake Value: $7,936,000

Percentage of Coann Capital’s 13F Portfolio: 7.65%

Number of Hedge Fund Holders: 17

OGE Energy Corp. (NYSE:OGE) is a regulated electric utility company that serves customers across Oklahoma and Arkansas. The company specializes in electric power generation and natural gas via its wholly owned subsidiary, Enogex Inc., which is a natural gas company. As one of the top stocks in Coann Capital’s Q3 portfolio, OGE Energy Corp. (NYSE:OGE) accounts for 7.65% of the firm’s investment portfolio as of September this year.

As of the second quarter of 2021, of the 873 hedge funds tracked by Insider Monkey, 17 funds were bullish on OGE Energy Corp. (NYSE:OGE), with stakes worth $276.7 million.

On November 4, EPS for the third quarter totaled $1.26, beating estimates by $0.08. OGE Energy Corp. (NYSE:OGE)’s Q3 revenue came in at $864.4 million, missing estimates by -$74.36 million.

In addition to Exelon Corporation (NASDAQ:EXC), Consolidated Edison, Inc. (NYSE:ED), Xcel Energy Inc. (NASDAQ:XEL), and The Southern Company (NYSE:SO), OGE Energy Corp. (NYSE:OGE) is a top stock in Davis’ Q3 portfolio.

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Disclosure: None. Matthew Davis' Coann Capital Portfolio: Top 10 Stock Picks is originally published on Insider Monkey.