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NRG Energy Inc (NRG): Are Hedge Funds Right About This Stock?

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NRG Energy Inc (NYSE:NRG) was in 37 hedge funds’ portfolio at the end of March. NRG investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. There were 38 hedge funds in our database with NRG positions at the end of the previous quarter.

According to most traders, hedge funds are perceived as slow, old financial vehicles of the past. While there are more than 8000 funds with their doors open at present, we at Insider Monkey hone in on the elite of this club, close to 450 funds. It is widely believed that this group oversees most of the hedge fund industry’s total asset base, and by monitoring their best stock picks, we have identified a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

NRG Energy Inc (NYSE:NRG)Equally as beneficial, optimistic insider trading sentiment is a second way to break down the stock market universe. There are lots of reasons for a bullish insider to drop shares of his or her company, but just one, very clear reason why they would buy. Various academic studies have demonstrated the useful potential of this tactic if investors know where to look (learn more here).

With all of this in mind, let’s take a look at the latest action regarding NRG Energy Inc (NYSE:NRG).

How have hedgies been trading NRG Energy Inc (NYSE:NRG)?

In preparation for this quarter, a total of 37 of the hedge funds we track were bullish in this stock, a change of -3% from the first quarter. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings significantly.

When looking at the hedgies we track, Perry Capital, managed by Richard Perry, holds the largest position in NRG Energy Inc (NYSE:NRG). Perry Capital has a $225.4 million position in the stock, comprising 7.2% of its 13F portfolio. The second largest stake is held by Carlson Capital, managed by Clint Carlson, which held a $139.8 million position; 1.9% of its 13F portfolio is allocated to the stock. Some other hedgies that are bullish include Israel Englander’s Millennium Management, Doug Silverman and Alexander Klabin’s Senator Investment Group and Jim Simons’s Renaissance Technologies.

Seeing as NRG Energy Inc (NYSE:NRG) has experienced a declination in interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedge funds who sold off their entire stakes at the end of the first quarter. At the top of the heap, John Paulson’s Paulson & Co said goodbye to the largest position of the “upper crust” of funds we key on, totaling about $71.3 million in stock., and Richard Perry of Perry Capital was right behind this move, as the fund cut about $17.7 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds at the end of the first quarter.

Insider trading activity in NRG Energy Inc (NYSE:NRG)

Insider purchases made by high-level executives is best served when the primary stock in question has seen transactions within the past half-year. Over the last 180-day time period, NRG Energy Inc (NYSE:NRG) has seen zero unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to NRG Energy Inc (NYSE:NRG). These stocks are NV Energy, Inc. (NYSE:NVE), Northeast Utilities System (NYSE:NU), CenterPoint Energy, Inc. (NYSE:CNP), NiSource Inc. (NYSE:NI), and Ameren Corp (NYSE:AEE). This group of stocks are the members of the diversified utilities industry and their market caps match NRG’s market cap.

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