Brooklyn’s Israel “Izzy” Englander founded his successful hedge fund Millennium Management in 1989, with only $35 million in capital. Since then, it has managed to accumulate more than $207 billion in assets under management, and boasts a U.S. equity portfolio valued at more than $43.68 million as of June 30. While Millennium’s portfolio is highly diversified, its most valuable stakes are dominated by utilities stocks.
In this article, we’ll take a look at Izzy’s favorite utilities positions, how they’ve been played over the second quarter, and how they’ve performed of late.
At Insider Monkey, we track around 750 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 the details here).
#5. NextEra Energy Inc (NYSE:NEE)
– Shares Held by Millennium Management (as of June 30): 2.06 million
– Value of Millennium Management’s Stake (as of June 30): $269.09 million
Millennium’s fifth-most valuable utilities stake and ninth overall as of June 30 was its NextEra Energy Inc (NYSE:NEE) holding, which the fund buffed by 16% during the second quarter. Among the 31 other funds in our database long the stock was Phill Gross and Robert Atchinson’s Adage Capital Management, which held 1.88 million NextEra shares on June 30. Since the third quarter began, shares of NextEra Energy Inc (NYSE:NEE) have lost more than 2% on the back of a revenue miss posted in late-July and the troubles surrounding its $18.4 billion acquisition of Oncor Electric Delivery. Last week, however, the company announced that it had managed to reach an agreement with lenders, which will fund roughly half of the purchase.
#4. Pinnacle West Capital Corporation (NYSE:PNW)
– Shares Held by Millennium Management (as of June 30): 3.42 million
– Value of Millennium Management’s Stake (as of June 30): $277.73 million
Even after a 7% reduction to its Pinnacle West Capital Corporation (NYSE:PNW) stake, it remained one of Millennium’s top utilities picks. Also reducing its exposure to the company during the second quarter was Jim Simons’ Renaissance Technologies, which trimmed its stake by 64% trim to 418,900 shares. Pinnacle West Capital Corporation (NYSE:PNW) has had a good year so far, returning more than 19% since January. Over the third quarter however, the stock has tumbled by 2.8%, prompted by an earnings miss posted in early-August. While second quarter revenue of $915.4 million beat estimates by more than $4 million, EPS of $1.08 missed targets by $0.06. Shares of Pinnacle West trade at roughly 20-times the company’s trailing-twelve-month earnings, at about a 35% premium to its peers, while offering below-average returns on equity and assets, and a levered balance sheet. On the other hand, its annual dividend yield stands at 3.25%.
We’ll check out Mr. Englander and his team’s top three utilities stock picks on the next page.