Is SCANA Corporation (SCG) a Good Buy?

Concerns over a shift in Fed’s easy monetary policy have hit several hedge funds hard during the third quarter. A number of sectors are in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25, 2015 and October 30, 2015. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards SCANA Corporation (NYSE:SCG).

Is SCANA Corporation (NYSE:SCG) a healthy stock for your portfolio? The smart money is turning less bullish. The number of bullish hedge fund positions retreated by 7 lately. SCG was in 12 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with SCG holdings at the end of the previous quarter. 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 Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR), New York Community Bancorp, Inc. (NYSE:NYCB), and Verisign, Inc. (NASDAQ:VRSN) to gather more data points.

Today there are tons of formulas market participants use to size up publicly traded companies. Some of the most under-the-radar formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the elite fund managers can beat the market by a very impressive amount (see the details here).

Now, we’re going to take a look at the key action surrounding SCANA Corporation (NYSE:SCG).

How have hedgies been trading SCANA Corporation (NYSE:SCG)?

Heading into Q4, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -37% from the second quarter. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in SCANA Corporation (NYSE:SCG). AQR Capital Management has a $22 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Carlson Capital, managed by Clint Carlson, which holds a $12.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions contain Vince Maddi and Shawn Brennan’s SIR Capital Management, Lee Munder’s Lee Munder Capital Group and David Harding’s Winton Capital Management.

Because SCANA Corporation (NYSE:SCG) has experienced falling interest from hedge fund managers, we can see that there was a specific group of hedgies that slashed their positions entirely last quarter. It’s worth mentioning that Jim Simons’s Renaissance Technologies cut the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising about $29.2 million in stock. Israel Englander’s fund, Millennium Management, also dumped its stock, about $13 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 7 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as SCANA Corporation (NYSE:SCG) but similarly valued. These stocks are Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR), New York Community Bancorp, Inc. (NYSE:NYCB), Verisign, Inc. (NASDAQ:VRSN), and SEI Investments Company (NASDAQ:SEIC). This group of stocks’ market values match SCG’s market value.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $763 million. That figure was $74 million in SCG’s case. Verisign, Inc. (NASDAQ:VRSN) is the most popular stock in this table. On the other hand Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks SCANA Corporation (NYSE:SCG) is even less popular than GMCR. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.