Billionaire Israel Englander’s Top Picks Dominated By These Utilities Stocks

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).

Millennium Management, Catapult Capital Management

#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.

Follow Nextera Energy Inc (NYSE:NEE)

#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%.

Follow Pinnacle West Capital Corp (NYSE:PNW)

We’ll check out Mr. Englander and his team’s top three utilities stock picks on the next page.

#3. Xcel Energy Inc (NYSE:XEL)

– Shares Held by Millennium Management (as of June 30): 6.58 million

– Value of Millennium Management’s Stake (as of June 30): $295.02 million

Mr. Englander’s fund increased the size of its position in Xcel Energy Inc (NYSE:XEL) by 142% over the second quarter, which left it as the largest shareholder of the stock as of June 30 among the investment firms that we track, 14 of which were long the stock. Also noteworthy was the new position initiated by Matthew Tewksbury’s Stevens Capital Management in the second quarter, which contained 49,164 shares at the end of June.

Shares of Xcel Energy Inc (NYSE:XEL) gained more than 24% over the first-half of the year, but have lost 3.4% so far in the second-half, partly driven by the company’s second quarter results, as EPS of $0.39 missed expectations by $0.01 and revenue of $2.5 billion fell $30 million short of estimates. A few weeks ago, the company declared a $0.34 per share quarterly dividend, which was unchanged from the previous payout. While this helped the stock briefly, it began declining again a couple of days after the announcement.

Follow Xcel Energy Inc (NYSE:XEL)

#2. PG&E Corporation (NYSE:PCG)

– Shares Held by Millennium Management (as of June 30): 4.8 million

– Value of Millennium Management’s Stake (as of June 30): $307.31 million

PG&E Corporation (NYSE:PCG) maintained its place as the third-most valuable holding in Millennium’s equity portfolio as of June 30, despite the position having been reduced by 10% in the second quarter. The group of 26 funds among those we track long the stock also included Dmitry Balyasny’s Balyasny Asset Management, which held more than 1.11 million shares of the company on June 30, after increasing its stake by 83% over the quarter.

PG&E Corporation (NYSE:PCG) has gained more than 18% year-to-date, even though it has been relatively flat over the third quarter. In the past few weeks, shares slipped on news that company had been found guilty of safety violations in the 2010 San Bruno, California, gas pipeline explosion that killed eight people. However, the news that hurt the stock the most was the August 16 announcement of a public offering of 4.9 million common shares priced at $63.25 per share.

Follow Pg&E Corp (NYSE:PCG)

#1. American Electric Power Company Inc (NYSE:AEP)

– Shares Held by Millennium Management (as of June 30): 5.39 million

– Value of Millennium Management’s Stake (as of June 30): $378.38 million

American Electric Power Company Inc (NYSE:AEP) was not only Englander’s favorite utilities stock, but also his most valuable equity holding as of June 30, outranked only by a $2 billion put options hedge against the SPDR S&P 500 ETF Trust (NYSEARCA:SPY). Ken Griffin’s Citadel Advisors was bullish on the company as well, disclosing ownership of 380,527 shares of it as of June 30.

American Electric Power Company Inc (NYSE:AEP) was quite volatile over the second quarter, staging a rebound in June after an early-quarter fall. Since the period ended, however, the stock has lost almost 4%, driven by poor second quarter revenue, which came in at $3.9 billion, $110 million below the Street’s consensus. EPS of $0.95, $0.05 above estimates, was not enough to counterbalance the sales miss. American Electric Power trades at almost 19-times its TTM earnings, at a premium to its peers, but offers a robust revenue growth story and a 3.39% annual dividend yield.

Follow Endo International Plc (NASDAQ:ENDP)

Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned in this article.