Should You Buy Eversource Energy (ES)?

At Insider Monkey we follow around 740 of the top investors and even though many of them underperformed the raging bull market, the history teaches us that over the long-run they still manage to beat the market after adjusting for risk, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following their best picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.

Eversource Energy (NYSE:ES) shareholders have witnessed an increase in hedge fund interest lately. ES was in 20 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with ES positions 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 Devon Energy Corp (NYSE:DVN), Vornado Realty Trust (NYSE:VNO), and M&T Bank Corporation (NYSE:MTB) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading Eversource Energy (NYSE:ES)?

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 25% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards ES over the last 5 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Israel Englander’s Millennium Management has the number one position in Eversource Energy (NYSE:ES), worth close to $87.7 million. The second largest stake is held by Phill Gross and Robert Atchinson of Adage Capital Management, with a $78.1 million position. Some other professional money managers that hold long positions consist of Jim Simons’ Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Mario Gabelli’s GAMCO Investors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now, some big names were leading the bulls’ herd. BlueCrest Capital Mgmt., led by Michael Platt and William Reeves, initiated the most outsized position in Eversource Energy (NYSE:ES). BlueCrest Capital Mgmt. had $1.2 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $1 million position during the quarter. The following funds were also among the new ES investors: Mike Vranos’ Ellington, Roger Ibbotson’s Zebra Capital Management, and David Harding’s Winton Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Eversource Energy (NYSE:ES) but similarly valued. We will take a look at Devon Energy Corp (NYSE:DVN), Vornado Realty Trust (NYSE:VNO), M&T Bank Corporation (NYSE:MTB), and Deutsche Bank AG (USA) (NYSE:DB). All of these stocks’ market caps are similar to ES’s market cap.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $626 million. That figure was $329 million in ES’s case. Devon Energy Corp (NYSE:DVN) is the most popular stock in this table. On the other hand M&T Bank Corporation (NYSE:MTB) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Eversource Energy (NYSE:ES) is even less popular than MTB. 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.

Disclosure: None