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Luminus Management Trying to Light the Way to Big Returns With These Utilities Stocks

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Luminus Management is a long/short hedge fund that focuses mainly on power and utility stocks. Established in 2002, the fund is currently run by Jonathan Barrett and Paul Segal, who have extensive knowledge of the utilities sector. The fund had approximately $5.28 billion in assets under management at the end of the first quarter, while its equity portfolio carried a market value of $3.02 billion. Utilities and telecommunication stocks accounted for 37% of the value of its equity portfolio, while 21% was represented by stocks from the materials sector. At the end of the December quarter, utilities stocks accounted for 50% of the fund’s portfolio, so Messrs. Segal and Barrett have shaken things up a bit. Let’s take a look at the fund’s five largest positions in utilities stocks and see how they were changed over the course of the first quarter.

electricity, pylon, network, lines, tower, steel, caution, high, grid, power, engineering, watt, infrastructure, cable, light, supply, distribution, voltage, technology, energy, volt,

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At Insider Monkey, we track around 765 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

Jonathan Barrett And Paul Segal
Jonathan Barrett And Paul Segal
Luminus Management

5. CenterPoint Energy, Inc. (NYSE:CNP)

Opening our top five is CenterPoint Energy, Inc. (NYSE:CNP), an energy delivery company based in Houston, Texas. According to its latest 13F filing, Luminus Management held 2.09 million shares of CenterPoint Energy valued at $43.8 million on March 31, with the share ownership down by 38% quarter-over-quarter. Overall hedge fund sentiment towards CenterPoint Energy improved significantly during the first three months of this year, as the number of long positions in the stock reported by funds in our database rose to 27 from 22. Billionaire Paul Singer was among those bullish on the stock, having boosted his fund’s stake in it by 52% to 13.5 million shares worth $283 million. The stock has been on a solid run, boosted by excellent financial results. For the first three months of 2016, CenterPoint Energy, Inc. (NYSE:CNP) posted a profit of $154 million or $0.36 per share, above analysts’ consensus estimate of $0.31 per share. Revenue came in at $1.98 billion, down by 18% year-over-year as mild winter weather had a negative impact on the demand for energy.

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4. Duke Energy Corp (NYSE:DUK)

Duke Energy Corp (NYSE:DUK) was also on Luminus Management’s selling list, with the fund having dumped 71% of its holding. At the end of the quarter, Luminus held 798,523 shares of company, which had been its second-largest holding on December 31. The slashed position was worth approximately $64.4 million on March 31. According to our data, the number of elite hedge funds invested in Duke Energy rose to 20 by the end of March, from 14 registered a quarter earlier. Duke Energy Corp (NYSE:DUK) is currently trading at a trailing Price to Earnings (P/E) ratio of 20, higher than the industry average of 14 according to Yahoo! Finance. The company has a market cap of $54 billion and pays an annual dividend of $3.30 per share, providing investors with a 4.20% annual dividend yield. Investment legend Stanley Druckenmiller had a completely different opinion on Duke Energy in the first quarter, as his family office Duquesne Capital established a fresh position that amounted to 649,100 shares.

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Turn the page to find out the three utility companies that Messrs. Barrett and Segal like best.

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