Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 15 S&P 500 stocks among hedge funds at the end of December 2018 yielded an average return of 19.7% year-to-date, vs. a gain of 13.1% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of NRG Energy Inc (NYSE:NRG).
Is NRG Energy Inc (NYSE:NRG) undervalued? Money managers are getting less bullish. The number of bullish hedge fund positions were cut by 1 recently. Our calculations also showed that NRG isn't among the 30 most popular stocks among hedge funds. NRG was in 49 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 50 hedge funds in our database with NRG holdings at the end of the previous quarter.
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We're going to take a glance at the new hedge fund action surrounding NRG Energy Inc (NYSE:NRG).
Hedge fund activity in NRG Energy Inc (NYSE:NRG)
At Q4's end, a total of 49 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NRG over the last 14 quarters. 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, Brahman Capital held the most valuable stake in NRG Energy Inc (NYSE:NRG), which was worth $323.3 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $257.1 million worth of shares. Moreover, Steadfast Capital Management, Two Sigma Advisors, and Millennium Management were also bullish on NRG Energy Inc (NYSE:NRG), allocating a large percentage of their portfolios to this stock.
Because NRG Energy Inc (NYSE:NRG) has witnessed falling interest from hedge fund managers, we can see that there exists a select few fund managers who sold off their full holdings by the end of the third quarter. Intriguingly, Jos Shaver's Electron Capital Partners dropped the biggest investment of the "upper crust" of funds followed by Insider Monkey, valued at close to $53.7 million in stock. Matthew Knauer and Mina Faltas's fund, Nokota Management, also dropped its stock, about $38.4 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks similar to NRG Energy Inc (NYSE:NRG). These stocks are Advance Auto Parts, Inc. (NYSE:AAP), Extra Space Storage, Inc. (NYSE:EXR), Godaddy Inc (NYSE:GDDY), and Quest Diagnostics Incorporated (NYSE:DGX). This group of stocks' market valuations are similar to NRG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AAP,51,1908548,13 EXR,24,211374,2 GDDY,43,2780202,-5 DGX,26,583622,-12 Average,36,1370937,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1371 million. That figure was $2016 million in NRG's case. Advance Auto Parts, Inc. (NYSE:AAP) is the most popular stock in this table. On the other hand Extra Space Storage, Inc. (NYSE:EXR) is the least popular one with only 24 bullish hedge fund positions. NRG Energy Inc (NYSE:NRG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately NRG wasn't in this group. Hedge funds that bet on NRG were disappointed as the stock returned 10.9% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.