A market correction in the third quarter, spurred by a number of global macroeconomic concerns ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by 14 percentage points between June 25 and the end of October. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of NRG Energy Inc (NYSE:NRG) during the quarter.
NRG Energy Inc (NYSE:NRG) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 31 hedge funds’ portfolios at the end of the third quarter of 2015. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as City National Corp (NYSE:CYN), Starwood Property Trust, Inc. (NYSE:STWD), and Southwestern Energy Company (NYSE:SWN) to gather more data points.
In the eyes of most stock holders, hedge funds are assumed to be underperforming, old financial tools of yesteryear. While there are greater than an 8000 funds in operation at present, We hone in on the aristocrats of this club, about 700 funds. It is estimated that this group of investors controls the lion’s share of the hedge fund industry’s total asset base, and by tracking their inimitable investments, Insider Monkey has formulated numerous investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points annually for a decade in their back tests.
With all of this in mind, let’s review the new action surrounding NRG Energy Inc (NYSE:NRG).
What does the smart money think about NRG Energy Inc (NYSE:NRG)?
At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Millennium Management, managed by Israel Englander, holds the most valuable position in NRG Energy Inc (NYSE:NRG). Millennium Management has a $148.2 million position in the stock, comprising 0.3% of its 13F portfolio. The second largest stake is held by Carlson Capital, managed by Clint Carlson, which holds a $146.9 million position; 1.7% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions include John Burbank’s Passport Capital, Soros Fund Management, and James Dondero’s Highland Capital Management.