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Was The Smart Money Right About NextEra Energy, Inc. (NEE)?

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  • NEE

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 30th, so let’s proceed with the discussion of the hedge fund sentiment on NextEra Energy, Inc. (NYSE:NEE).

NextEra Energy, Inc. (NYSE:NEE) has experienced a decrease in enthusiasm from smart money of late. NextEra Energy, Inc. (NYSE:NEE) was in 59 hedge funds' portfolios at the end of June. 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 Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ian Wace Marshall Wace
Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. We go through lists like the 10 best EV 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. With all of this in mind we're going to review the key hedge fund action regarding NextEra Energy, Inc. (NYSE:NEE).

Do Hedge Funds Think NEE Is A Good Stock To Buy Now?

At second quarter's end, a total of 59 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 55 hedge funds with a bullish position in NEE a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Fisher Asset Management held the most valuable stake in NextEra Energy, Inc. (NYSE:NEE), which was worth $1037.1 million at the end of the second quarter. On the second spot was D E Shaw which amassed $350 million worth of shares. Adage Capital Management, Millennium Management, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Coann Capital allocated the biggest weight to NextEra Energy, Inc. (NYSE:NEE), around 4.55% of its 13F portfolio. Engine No. 1 LLC is also relatively very bullish on the stock, setting aside 3.93 percent of its 13F equity portfolio to NEE.

Because NextEra Energy, Inc. (NYSE:NEE) has witnessed declining sentiment from the smart money, it's safe to say that there was a specific group of fund managers that elected to cut their positions entirely in the second quarter. Intriguingly, Steve Cohen's Point72 Asset Management dumped the largest investment of the "upper crust" of funds followed by Insider Monkey, totaling close to $95.2 million in stock, and Brandon Haley's Holocene Advisors was right behind this move, as the fund dropped about $50.3 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 4 funds in the second quarter.

Let's go over hedge fund activity in other stocks similar to NextEra Energy, Inc. (NYSE:NEE). We will take a look at Anheuser-Busch InBev SA/NV (NYSE:BUD), The Boeing Company (NYSE:BA), Amgen, Inc. (NASDAQ:AMGN), The Charles Schwab Corporation (NYSE:SCHW), Lowe's Companies, Inc. (NYSE:LOW), Rio Tinto Group (NYSE:RIO), and HDFC Bank Limited (NYSE:HDB). 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 BUD,18,1234449,0 BA,59,1368946,0 AMGN,53,1651799,6 SCHW,72,4851670,-4 LOW,63,4968014,2 RIO,21,1420451,-4 HDB,39,1731917,12 Average,46.4,2461035,1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.4 hedge funds with bullish positions and the average amount invested in these stocks was $2461 million. That figure was $2687 million in NEE's case. The Charles Schwab Corporation (NYSE:SCHW) is the most popular stock in this table. On the other hand Anheuser-Busch InBev SA/NV (NYSE:BUD) is the least popular one with only 18 bullish hedge fund positions. NextEra Energy, Inc. (NYSE:NEE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NEE is 66.6. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Hedge funds were also right about betting on NEE as the stock returned 17% since the end of Q2 (through 10/29) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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