Hedge funds are not perfect. They have their bad picks just like everyone else. Micron, a stock hedge funds have loved, lost 50% during the last 12 months ending in October 30. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% in the same time period, vs. a gain of 5.2% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Dominion Resources, Inc. (NYSE:D).
Dominion Resources, Inc. (NYSE:D) has experienced an increase in enthusiasm from smart money lately. At the end of this article, we will also compare Dominion Resources, Inc. (NYSE:D) to other stocks including Phillips 66 (NYSE:PSX), Shire PLC (ADR) (NASDAQ:SHPG), and Adobe Systems Incorporated (NASDAQ:ADBE) to get a better sense of its popularity.
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At the moment, there are a multitude of signals shareholders have at their disposal to evaluate their stock investments. A couple of the most innovative signals are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top money managers can outclass their index-focused peers by a significant amount (see the details here).
Keeping this in mind, let’s review the latest action encompassing Dominion Resources, Inc. (NYSE:D).
What does the smart money think about Dominion Resources, Inc. (NYSE:D)?
At the end of Q3, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 9% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Phill Gross and Robert Atchinson’s Adage Capital Management has the most valuable position in Dominion Resources, Inc. (NYSE:D), worth close to $99.7 million, accounting for 0.3% of its total 13F portfolio. The second most bullish fund manager is Luminus Management, led by Jonathan Barrett and Paul Segal, holding a $75 million position; 2.3% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions consist of Renaissance Technologies, Anand Parekh’s Alyeska Investment Group, and Matthew Tewksbury’s Stevens Capital Management.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Carlson Capital, managed by Clint Carlson, created the biggest position in Dominion Resources, Inc. (NYSE:D). Carlson Capital had $16 million invested in the company at the end of the quarter. D E Shaw also initiated a $5.5 million position during the quarter. The following funds were also among the new Dominion Resources, Inc. (NYSE:D) investors: Peter Muller’s PDT Partners, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Richard Driehaus’ Driehaus Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Dominion Resources, Inc. (NYSE:D) but similarly valued. These stocks are Phillips 66 (NYSE:PSX), Shire PLC (ADR) (NASDAQ:SHPG), Adobe Systems Incorporated (NASDAQ:ADBE), and FedEx Corporation (NYSE:FDX). This group of stocks’ market valuations is closest to Dominion Resources, Inc. (NYSE:D)’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PSX | 33 | 6722714 | -2 |
| SHPG | 43 | 2498587 | -1 |
| ADBE | 42 | 4069926 | 3 |
| FDX | 53 | 4136169 | 1 |
As you can see, these stocks had an average of 43 hedge funds with bullish positions and the average amount invested in these stocks was $4.36 billion. That figure was $397 million in Dominion Resources, Inc. (NYSE:D)’s case. FedEx Corporation (NYSE:FDX) is the most popular stock in this table. On the other hand, Phillips 66 (NYSE:PSX) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks, Dominion Resources, Inc. (NYSE:D) is even less popular than Phillips 66 (NYSE:PSX). 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.
