5 Best Beaten Down Stocks to Buy Now

3. FirstEnergy Corporation (NYSE:FE)

No of HFs: 59

Total Value of HF Holdings: $1.28 Billion

FE lost 32% since the end of 2019. The top hedge fund holder of this stock is Stuart J. Zimmer’s Zimmer Partners which had $161 million invested in the stock at the end of September. An insider recently purchased 100 shares at around $41 in May 2019. The stock is down 24% since then. FE was mentioned as one of the 5 Best Utility Stocks to Buy Now. FE was mentioned in Heartland Mid Cap Value Fund’s Q3 2020 investor letter.

“The portfolio’s Utility names lagged on a relative basis with the shortfall stemming from a stock-specific issue in the group. FirstEnergy (FE) is a business we’ve owned in the past and sold out of after shares had appreciated following its successful transition to a pure regulated utility through the divestiture of its merchant power unit.

We initiated a new stake in FirstEnergy in March after shares sold off due to concerns that the recession would have an outsized impact on the company’s industrial-oriented client base. Similar to our successful experience in the past, we felt that the company was attractive given its meaningful discount to its peers.

Subsequent to our investment, FirstEnergy was named in an investigation related to $60 million of payments made by the merchant power entity to Ohio politicians. Our initial reaction when news broke was to reduce our exposure to the company, however, we continued our due diligence on the matter and believe that market reaction overestimated the likely fallout from the investigation.

As shares fell in price, we added to our position in the belief that as the matter proceeds, some of the clouds casting a shadow on the business will subside.”