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Did Hedge Funds Drop The Ball On WEC Energy Group, Inc. (WEC)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 28, so let’s proceed with the discussion of the hedge fund sentiment on WEC Energy Group, Inc. (NYSE:WEC).

Is WEC Energy Group, Inc. (NYSE:WEC) the right investment to pursue these days? Prominent investors are in a pessimistic mood. The number of long hedge fund positions went down by 2 recently. Our calculations also showed that WEC isn’t among the 30 most popular stocks among hedge funds. WEC was in 13 hedge funds’ portfolios at the end of June. There were 15 hedge funds in our database with WEC positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

WEC_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the new hedge fund action surrounding WEC Energy Group, Inc. (NYSE:WEC).

What does smart money think about WEC Energy Group, Inc. (NYSE:WEC)?

Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in WEC over the last 16 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Millennium Management, Catapult Capital Management

The largest stake in WEC Energy Group, Inc. (NYSE:WEC) was held by Renaissance Technologies, which reported holding $288.1 million worth of stock at the end of March. It was followed by AQR Capital Management with a $61.2 million position. Other investors bullish on the company included GLG Partners, Millennium Management, and Zimmer Partners.

Since WEC Energy Group, Inc. (NYSE:WEC) has witnessed declining sentiment from hedge fund managers, we can see that there were a few funds that slashed their full holdings last quarter. Interestingly, Ken Griffin’s Citadel Investment Group sold off the biggest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $9.9 million in call options, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $7.9 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to WEC Energy Group, Inc. (NYSE:WEC). These stocks are Spotify Technology S.A. (NYSE:SPOT), Corning Incorporated (NYSE:GLW), Wipro Limited (NYSE:WIT), and Brown-Forman Corporation (NYSE:BF). This group of stocks’ market caps match WEC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SPOT 42 1748170 -11
GLW 26 279452 -11
WIT 14 145135 3
BF 28 698333 4
Average 27.5 717773 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $718 million. That figure was $393 million in WEC’s case. Spotify Technology S.A. (NYSE:SPOT) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks WEC Energy Group, Inc. (NYSE:WEC) is even less popular than WIT. Hedge funds clearly dropped the ball on WEC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on WEC as the stock returned 14.8% during the third quarter and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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