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Did Hedge Funds Make The Right Call On Public Service Enterprise Group Incorporated (PEG) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Public Service Enterprise Group Incorporated (NYSE:PEG) and determine whether the smart money was really smart about this stock.

Is Public Service Enterprise Group Incorporated (NYSE:PEG) a buy, sell, or hold? Hedge funds were getting more optimistic. The number of long hedge fund positions inched up by 3 recently. Our calculations also showed that PEG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). PEG was in 34 hedge funds’ portfolios at the end of March. There were 31 hedge funds in our database with PEG positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are plenty of metrics stock traders put to use to size up stocks. Some of the most under-the-radar metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top money managers can trounce the S&P 500 by a significant amount (see the details here).

Clint Carlson of Carlson Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the fresh hedge fund action encompassing Public Service Enterprise Group Incorporated (NYSE:PEG).

What have hedge funds been doing with Public Service Enterprise Group Incorporated (NYSE:PEG)?

At the end of the first quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PEG over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in Public Service Enterprise Group Incorporated (NYSE:PEG). AQR Capital Management has a $171.2 million position in the stock, comprising 0.3% of its 13F portfolio. The second largest stake is held by Zimmer Partners, led by Stuart J. Zimmer, holding a $123.5 million position; 2.7% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions include D. E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors and Renaissance Technologies. In terms of the portfolio weights assigned to each position Ecofin Ltd allocated the biggest weight to Public Service Enterprise Group Incorporated (NYSE:PEG), around 4.81% of its 13F portfolio. Yaupon Capital is also relatively very bullish on the stock, designating 2.94 percent of its 13F equity portfolio to PEG.

As aggregate interest increased, specific money managers have jumped into Public Service Enterprise Group Incorporated (NYSE:PEG) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in Public Service Enterprise Group Incorporated (NYSE:PEG). Arrowstreet Capital had $36.5 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also made a $26.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Brandon Haley’s Holocene Advisors, Greg Eisner’s Engineers Gate Manager, and Sara Nainzadeh’s Centenus Global Management.

Let’s check out hedge fund activity in other stocks similar to Public Service Enterprise Group Incorporated (NYSE:PEG). These stocks are Motorola Solutions Inc (NYSE:MSI), Paychex, Inc. (NASDAQ:PAYX), O’Reilly Automotive Inc (NASDAQ:ORLY), and KLA Corporation (NASDAQ:KLAC). This group of stocks’ market caps are similar to PEG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MSI 34 308519 -7
PAYX 41 643102 5
ORLY 60 2486584 -4
KLAC 26 382931 -4
Average 40.25 955284 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.25 hedge funds with bullish positions and the average amount invested in these stocks was $955 million. That figure was $902 million in PEG’s case. O’Reilly Automotive Inc (NASDAQ:ORLY) is the most popular stock in this table. On the other hand KLA Corporation (NASDAQ:KLAC) is the least popular one with only 26 bullish hedge fund positions. Public Service Enterprise Group Incorporated (NYSE:PEG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately PEG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PEG investors were disappointed as the stock returned 10.5% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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