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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 December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded NextEra Energy, Inc. (NYSE:NEE) based on those filings.
Is NEE stock a buy or sell? NextEra Energy, Inc. (NYSE:NEE) investors should pay attention to a decrease in hedge fund sentiment of late. NextEra Energy, Inc. (NYSE:NEE) was in 61 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 64. Our calculations also showed that NEE isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 124 percentage points since March 2017 (see the details here).
Cliff Asness of AQR Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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 (or at the end of this article). With all of this in mind let's check out the latest hedge fund action surrounding NextEra Energy, Inc. (NYSE:NEE).
Do Hedge Funds Think NEE Is A Good Stock To Buy Now?
At the end of December, a total of 61 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. On the other hand, there were a total of 46 hedge funds with a bullish position in NEE a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in NextEra Energy, Inc. (NYSE:NEE) was held by Fisher Asset Management, which reported holding $1006.5 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $191.3 million position. Other investors bullish on the company included AQR Capital Management, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position Ecofin Ltd allocated the biggest weight to NextEra Energy, Inc. (NYSE:NEE), around 12.06% of its 13F portfolio. Engine No. 1 LLC is also relatively very bullish on the stock, dishing out 6.27 percent of its 13F equity portfolio to NEE.
Judging by the fact that NextEra Energy, Inc. (NYSE:NEE) has witnessed declining sentiment from the entirety of the hedge funds we track, it's safe to say that there was a specific group of funds who sold off their full holdings heading into Q1. At the top of the heap, Ken Griffin's Citadel Investment Group said goodbye to the largest position of the 750 funds followed by Insider Monkey, worth close to $64 million in stock, and David Costen Haley's HBK Investments was right behind this move, as the fund dropped about $14.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 3 funds heading into Q1.
Let's now take a look at hedge fund activity in other stocks similar to NextEra Energy, Inc. (NYSE:NEE). We will take a look at Texas Instruments Incorporated (NASDAQ:TXN), Honeywell International Inc. (NYSE:HON), United Parcel Service, Inc. (NYSE:UPS), Union Pacific Corporation (NYSE:UNP), Bristol Myers Squibb Company (NYSE:BMY), Linde plc (NYSE:LIN), and Shopify Inc (NYSE:SHOP). This group of stocks' market caps are similar to NEE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TXN,56,2497473,1 HON,45,983560,4 UPS,48,1253721,-9 UNP,68,3539131,-6 BMY,131,6088294,7 LIN,50,3950824,-10 SHOP,90,8723023,9 Average,69.7,3862289,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 69.7 hedge funds with bullish positions and the average amount invested in these stocks was $3862 million. That figure was $3078 million in NEE's case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand Honeywell International Inc. (NYSE:HON) is the least popular one with only 45 bullish hedge fund positions. NextEra Energy, Inc. (NYSE:NEE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NEE is 39.9. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and surpassed the market again by 0.8 percentage points. Unfortunately NEE wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); NEE investors were disappointed as the stock returned -7.7% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.