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In this article we will analyze whether FirstEnergy Corp. (NYSE:FE) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
FirstEnergy Corp. (NYSE:FE) has experienced an increase in support from the world's most elite money managers lately. FirstEnergy Corp. (NYSE:FE) was in 51 hedge funds' portfolios at the end of March. The all time high for this statistic is 59. There were 50 hedge funds in our database with FE positions at the end of the fourth quarter. Our calculations also showed that FE isn't among the 30 most popular stocks among hedge funds (click for Q1 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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Carl Icahn of Icahn Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 homepage. Keeping this in mind we're going to check out the new hedge fund action regarding FirstEnergy Corp. (NYSE:FE).
Do Hedge Funds Think FE Is A Good Stock To Buy Now?
At the end of March, a total of 51 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FE over the last 23 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Carl Icahn's Icahn Capital LP has the most valuable position in FirstEnergy Corp. (NYSE:FE), worth close to $658 million, accounting for 2.8% of its total 13F portfolio. Sitting at the No. 2 spot is First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, which holds a $144.9 million position; 2% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions encompass D. E. Shaw's D E Shaw, Michael A. Price and Amos Meron's Empyrean Capital Partners and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Mountaineer Partners Management allocated the biggest weight to FirstEnergy Corp. (NYSE:FE), around 6.42% of its 13F portfolio. Mariner Investment Group is also relatively very bullish on the stock, designating 5.95 percent of its 13F equity portfolio to FE.
As aggregate interest increased, specific money managers were leading the bulls' herd. Icahn Capital LP, managed by Carl Icahn, created the most outsized position in FirstEnergy Corp. (NYSE:FE). Icahn Capital LP had $658 million invested in the company at the end of the quarter. Didric Cederholm's Lion Point also initiated a $24.3 million position during the quarter. The other funds with new positions in the stock are Steve Cohen's Point72 Asset Management, Aaron Wertentheil's Jones Road Capital Management, and Gilchrist Berg's Water Street Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as FirstEnergy Corp. (NYSE:FE) but similarly valued. These stocks are MGM Resorts International (NYSE:MGM), Farfetch Limited (NYSE:FTCH), Citizens Financial Group Inc (NYSE:CFG), Ubiquiti Inc. (NYSE:UI), CGI Inc. (NYSE:GIB), MarketAxess Holdings Inc. (NASDAQ:MKTX), and Coupa Software Incorporated (NASDAQ:COUP). This group of stocks' market caps resemble FE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MGM,57,2715848,13 FTCH,57,3095281,10 CFG,41,579075,3 UI,19,278681,0 GIB,15,187732,0 MKTX,34,672097,0 COUP,50,3702472,-12 Average,39,1604455,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $1604 million. That figure was $1841 million in FE's case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 15 bullish hedge fund positions. FirstEnergy Corp. (NYSE:FE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FE is 74.8. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on FE, though not to the same extent, as the stock returned 8.1% since Q1 (through June 18th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.