Is PG and E Corporation (PCG) A Smart Long-Term Buy?

GoodHaven Capital Management, a concentrated portfolio investment management firm, published its fourth quarter 2020 investor letter – a copy of which can be downloaded here. A return of 7.93% was recorded by the fund at year end of 2020, below its S&P 500 benchmark that delivered a 17.46% return in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

GoodHaven Capital Management, in their Q4 2020 investor letter, mentioned PG&E Corporation (NYSE: PCG) and emphasized their views on the company. PG&E Corporation is a San Francisco, California-based natural gas and electric service provider that currently has a $23.6 billion market capitalization. Since the beginning of the year, PCG delivered a -4.37% return, while its 12-month gains are still up by 24.11%. As of March 25, 2021, the stock closed at $11.89 per share.

Here is what GoodHaven Capital Management has to say about PG&E Corporation in their Q4 2020 investor letter:

"During the period we purchased a new holding – PG&E Corporation – the California based utility (PCG). We expect that contrarian special situations will continue to (opportunistically) be an important part of the portfolio. After all, we bought PCG – which has filed Ch. 11 twice related to prior exposure to wildfire liabilities and staggering mismanagement – right in the middle of California’s recent heavy wildfire season. Our thinking here is that the reorganized utility has new regulatory protections that significantly reduces wildfire liability exposure, an above average rate growth profile and potentially much better management – they were searching for a new CEO when we made our investment. We purchased the stock at a high single digit forward earnings multiple, a discount to its peers that trade in the mid to high teens. Shortly after our purchases PG&E hired the well regarded Patti Poppe as their new CEO – we like this decision."

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Our calculations show that PG&E Corporation (NYSE: PCG) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, PG&E Corporation was in 66 hedge fund portfolios, compared to 76 funds in the third quarter. PCG delivered a -3.75% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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Disclosure: None. This article is originally published at Insider Monkey.