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Is WEC Stock A Buy or Sell?

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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 December 31st, so let’s proceed with the discussion of the hedge fund sentiment on WEC Energy Group, Inc. (NYSE:WEC).

Is WEC stock a buy? WEC Energy Group, Inc. (NYSE:WEC) shareholders have witnessed an increase in hedge fund interest in recent months. WEC Energy Group, Inc. (NYSE:WEC) was in 25 hedge funds' portfolios at the end of December. The all time high for this statistic is 30. Our calculations also showed that WEC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 124 percentage points since March 2017 (see the details here).

Michael Gelband of ExodusPoint Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Keeping this in mind we're going to take a look at the latest hedge fund action encompassing WEC Energy Group, Inc. (NYSE:WEC).

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

At Q4's end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WEC over the last 22 quarters. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Among these funds, D E Shaw held the most valuable stake in WEC Energy Group, Inc. (NYSE:WEC), which was worth $79.6 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $68.8 million worth of shares. Millennium Management, Two Sigma Advisors, and ExodusPoint Capital 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 Quantamental Technologies allocated the biggest weight to WEC Energy Group, Inc. (NYSE:WEC), around 1.13% of its 13F portfolio. Brasada Capital Management is also relatively very bullish on the stock, dishing out 0.76 percent of its 13F equity portfolio to WEC.

There weren't any hedge funds initiating brand new positions in the stock during the fourth quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as WEC Energy Group, Inc. (NYSE:WEC) but similarly valued. These stocks are Teladoc Health, Inc (NYSE:TDOC), Huazhu Group Limited (NASDAQ:HTHT), Corteva, Inc. (NYSE:CTVA), Motorola Solutions Inc (NYSE:MSI), Stanley Black & Decker, Inc. (NYSE:SWK), Canadian Natural Resources Limited (NYSE:CNQ), and Archer Daniels Midland Company (NYSE:ADM). This group of stocks' market valuations are similar to WEC's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TDOC,50,2616714,3 HTHT,23,612105,2 CTVA,38,1398326,2 MSI,35,777259,6 SWK,38,846102,0 CNQ,29,341108,-1 ADM,35,703261,9 Average,35.4,1042125,3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.4 hedge funds with bullish positions and the average amount invested in these stocks was $1042 million. That figure was $245 million in WEC's case. Teladoc Health, Inc (NYSE:TDOC) is the most popular stock in this table. On the other hand Huazhu Group Limited (NASDAQ:HTHT) is the least popular one with only 23 bullish hedge fund positions. WEC Energy Group, Inc. (NYSE:WEC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WEC is 36.7. 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 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately WEC wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); WEC investors were disappointed as the stock returned 6.1% since the end of December (through 4/19) 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.

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