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 Exelon Corporation (NYSE:EXC).
Is Exelon Corporation (NYSE:EXC) a buy, sell, or hold? Investors who are in the know are taking a pessimistic view. The number of long hedge fund positions were trimmed by 2 in recent months. Our calculations also showed that EXC 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).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_745225" align="aligncenter" width="400"] Noam Gottesman of GLG Partners[/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. With all of this in mind we're going to check out the fresh hedge fund action regarding Exelon Corporation (NYSE:EXC).
Hedge fund activity in Exelon Corporation (NASDAQ:EXC)
At Q4's end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 33 hedge funds with a bullish position in EXC a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Exelon Corporation (NASDAQ:EXC) was held by AQR Capital Management, which reported holding $632.7 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $289.1 million position. Other investors bullish on the company included D E Shaw, GLG Partners, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Covalis Capital allocated the biggest weight to Exelon Corporation (NASDAQ:EXC), around 35.53% of its 13F portfolio. Electron Capital Partners is also relatively very bullish on the stock, setting aside 9.83 percent of its 13F equity portfolio to EXC.
Because Exelon Corporation (NASDAQ:EXC) has experienced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there was a specific group of hedge funds who were dropping their positions entirely by the end of the third quarter. Interestingly, Stuart J. Zimmer's Zimmer Partners dumped the largest position of the "upper crust" of funds followed by Insider Monkey, totaling close to $41.9 million in stock, and Josh Donfeld and David Rogers's Castle Hook Partners was right behind this move, as the fund said goodbye to about $37.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Exelon Corporation (NASDAQ:EXC). We will take a look at Pinduoduo Inc. (NASDAQ:PDD), Koninklijke Philips NV (NYSE:PHG), Baidu, Inc. (NASDAQ:BIDU), and Analog Devices, Inc. (NASDAQ:ADI). This group of stocks' market caps match EXC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PDD,32,1682011,1 PHG,9,179950,1 BIDU,60,2832866,12 ADI,51,2513701,5 Average,38,1802132,4.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $1802 million. That figure was $1822 million in EXC's case. Baidu, Inc. (NASDAQ:BIDU) is the most popular stock in this table. On the other hand Koninklijke Philips NV (NYSE:PHG) is the least popular one with only 9 bullish hedge fund positions. Exelon Corporation (NASDAQ:EXC) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 beat the market by 12.9 percentage points. Unfortunately EXC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); EXC investors were disappointed as the stock returned -20.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020. 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.