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Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Eversource Energy (NYSE:ES).
Is Eversource Energy (NYSE:ES) going to take off soon? Prominent investors are betting on the stock. The number of long hedge fund positions went up by 2 in recent months. Our calculations also showed that ES isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader's corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a peek at the latest hedge fund action surrounding Eversource Energy (NYSE:ES).
Hedge fund activity in Eversource Energy (NYSE:ES)
At Q4's end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the third quarter of 2019. On the other hand, there were a total of 20 hedge funds with a bullish position in ES 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.
Among these funds, Zimmer Partners held the most valuable stake in Eversource Energy (NYSE:ES), which was worth $140.4 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $81.9 million worth of shares. Renaissance Technologies, Millennium Management, and Adage 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 Sustainable Insight Capital Management allocated the biggest weight to Eversource Energy (NYSE:ES), around 2.93% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, dishing out 1.94 percent of its 13F equity portfolio to ES.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Paloma Partners, managed by Donald Sussman, initiated the most outsized position in Eversource Energy (NYSE:ES). Paloma Partners had $22 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $5.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Qing Li's Sciencast Management, Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, and Jinghua Yan's TwinBeech Capital.
Let's check out hedge fund activity in other stocks similar to Eversource Energy (NYSE:ES). We will take a look at Nutrien Ltd. (NYSE:NTR), Cummins Inc. (NYSE:CMI), PACCAR Inc (NASDAQ:PCAR), and SBA Communications Corporation (NASDAQ:SBAC). This group of stocks' market valuations are closest to ES's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTR,28,408982,0 CMI,39,768817,5 PCAR,36,216367,8 SBAC,45,1560377,4 Average,37,738636,4.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $739 million. That figure was $453 million in ES's case. SBA Communications Corporation (NASDAQ:SBAC) is the most popular stock in this table. On the other hand Nutrien Ltd. (NYSE:NTR) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Eversource Energy (NYSE:ES) is even less popular than NTR. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but managed to beat the market by 12.9 percentage points. A small number of hedge funds were also right about betting on ES, though not to the same extent, as the stock returned -5.5% during the same time period and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.