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Hedge Funds Are Done Buying Duke Energy Corporation (DUK)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Duke Energy Corporation (NYSE:DUK) based on that data.

Duke Energy Corporation (NYSE:DUK) was in 35 hedge funds’ portfolios at the end of March. DUK shareholders have witnessed a decrease in hedge fund interest of late. There were 37 hedge funds in our database with DUK positions at the end of the previous quarter. Our calculations also showed that DUK 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).

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

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Clint Carlson of Carlson Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the key hedge fund action encompassing Duke Energy Corporation (NYSE:DUK).

What does smart money think about Duke Energy Corporation (NYSE:DUK)?

At Q1’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DUK over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is DUK A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the most valuable position in Duke Energy Corporation (NYSE:DUK). Renaissance Technologies has a $572.5 million position in the stock, comprising 0.6% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $301 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism consist of D. E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Electron Capital Partners allocated the biggest weight to Duke Energy Corporation (NYSE:DUK), around 15.49% of its 13F portfolio. Blackstart Capital is also relatively very bullish on the stock, earmarking 9.36 percent of its 13F equity portfolio to DUK.

Since Duke Energy Corporation (NYSE:DUK) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers that slashed their positions entirely heading into Q4. Intriguingly, Greg Poole’s Echo Street Capital Management dumped the biggest investment of all the hedgies watched by Insider Monkey, totaling about $28.7 million in stock. Noam Gottesman’s fund, GLG Partners, also cut its stock, about $19.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Duke Energy Corporation (NYSE:DUK) but similarly valued. We will take a look at JD.Com Inc (NASDAQ:JD), Automatic Data Processing (NASDAQ:ADP), Enbridge Inc (NYSE:ENB), and Allergan plc (NYSE:AGN). This group of stocks’ market values are closest to DUK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JD 90 7919916 27
ADP 46 1444924 -5
ENB 25 297504 4
AGN 95 12598171 9
Average 64 5565129 8.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 64 hedge funds with bullish positions and the average amount invested in these stocks was $5565 million. That figure was $1574 million in DUK’s case. Allergan plc (NYSE:AGN) is the most popular stock in this table. On the other hand Enbridge Inc (NYSE:ENB) is the least popular one with only 25 bullish hedge fund positions. Duke Energy Corporation (NYSE:DUK) 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately DUK wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); DUK investors were disappointed as the stock returned 7.1% 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.