Were Hedge Funds Right About WEC Energy Group (WEC)?
We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let's take a look at whether WEC Energy Group, Inc. (NYSE:WEC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is WEC Energy Group, Inc. (NYSE:WEC) a healthy stock for your portfolio? Money managers are in a pessimistic mood. The number of long hedge fund bets fell by 7 lately. Our calculations also showed that WEC 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).
If you'd ask most shareholders, hedge funds are viewed as worthless, outdated financial vehicles of yesteryear. While there are over 8000 funds with their doors open at the moment, We look at the crème de la crème of this group, around 850 funds. These investment experts oversee the lion's share of the hedge fund industry's total asset base, and by watching their finest equity investments, Insider Monkey has identified a few investment strategies that have historically outperformed Mr. Market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_745225" align="aligncenter" width="399"]
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. Now we're going to take a gander at the latest hedge fund action encompassing WEC Energy Group, Inc. (NYSE:WEC).
What have hedge funds been doing with WEC Energy Group, Inc. (NYSE:WEC)?
At Q4's end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -32% from the third quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in WEC 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.
According to Insider Monkey's hedge fund database, Renaissance Technologies has the largest position in WEC Energy Group, Inc. (NYSE:WEC), worth close to $87.2 million, accounting for 0.1% of its total 13F portfolio. Coming in second is AQR Capital Management, managed by Cliff Asness, which holds a $75.1 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions include Noam Gottesman's GLG Partners, D. E. Shaw's D E Shaw and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Signition LP allocated the biggest weight to WEC Energy Group, Inc. (NYSE:WEC), around 3.05% of its 13F portfolio. CSat Investment Advisory is also relatively very bullish on the stock, designating 0.15 percent of its 13F equity portfolio to WEC.
Due to the fact that WEC Energy Group, Inc. (NYSE:WEC) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who sold off their entire stakes in the third quarter. Intriguingly, Dmitry Balyasny's Balyasny Asset Management dumped the largest investment of the 750 funds monitored by Insider Monkey, comprising an estimated $13.6 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund dumped about $8.9 million worth. These moves are important to note, as total hedge fund interest dropped by 7 funds in the third quarter.
Let's go over hedge fund activity in other stocks similar to WEC Energy Group, Inc. (NYSE:WEC). These stocks are Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), State Street Corporation (NYSE:STT), The Williams Companies, Inc. (NYSE:WMB), and China Unicom (Hong Kong) Limited (NYSE:CHU). 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 ERIC,18,367933,-2 STT,45,1286711,8 WMB,40,958886,0 CHU,11,60557,3 Average,28.5,668522,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $669 million. That figure was $212 million in WEC's case. State Street Corporation (NYSE:STT) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) is the least popular one with only 11 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 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. A small number of hedge funds were also right about betting on WEC, though not to the same extent, as the stock returned -3.5% during the same time period and outperformed the market.
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.
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