How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Eversource Energy (NYSE:ES).
Is Eversource Energy (NYSE:ES) worth your attention right now? The smart money was in a pessimistic mood. The number of bullish hedge fund bets shrunk by 5 recently. Eversource Energy (NYSE:ES) was in 21 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 28. Our calculations also showed that ES isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 26 hedge funds in our database with ES positions at the end of the second quarter.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s review the new hedge fund action encompassing Eversource Energy (NYSE:ES).
Do Hedge Funds Think ES Is A Good Stock To Buy Now?
At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in ES over the last 25 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors has the biggest position in Eversource Energy (NYSE:ES), worth close to $25.3 million, comprising 0.3% of its total 13F portfolio. The second largest stake is held by Cliff Asness of AQR Capital Management, with a $21.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions consist of D. E. Shaw’s D E Shaw, Mario Gabelli’s GAMCO Investors and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Sustainable Insight Capital Management allocated the biggest weight to Eversource Energy (NYSE:ES), around 0.85% of its 13F portfolio. Schonfeld Strategic Advisors is also relatively very bullish on the stock, dishing out 0.26 percent of its 13F equity portfolio to ES.
Judging by the fact that Eversource Energy (NYSE:ES) has experienced declining sentiment from the smart money, it’s easy to see that there lies a certain “tier” of hedge funds who sold off their positions entirely in the third quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management said goodbye to the largest position of the “upper crust” of funds monitored by Insider Monkey, totaling close to $52.6 million in stock. Matthew Davis’s fund, Coann Capital, also dumped its stock, about $6.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 5 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Eversource Energy (NYSE:ES) but similarly valued. These stocks are Las Vegas Sands Corp. (NYSE:LVS), Yandex NV (NASDAQ:YNDX), Synchrony Financial (NYSE:SYF), WEC Energy Group, Inc. (NYSE:WEC), Occidental Petroleum Corporation (NYSE:OXY), Zebra Technologies Corporation (NASDAQ:ZBRA), and PACCAR Inc (NASDAQ:PCAR). All of these stocks’ market caps resemble ES’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LVS | 40 | 938057 | -8 |
| YNDX | 27 | 1432186 | -4 |
| SYF | 35 | 1376950 | -4 |
| WEC | 31 | 432498 | 4 |
| OXY | 60 | 3189745 | 3 |
| ZBRA | 39 | 1304604 | 5 |
| PCAR | 26 | 472066 | -2 |
| Average | 36.9 | 1306587 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.9 hedge funds with bullish positions and the average amount invested in these stocks was $1307 million. That figure was $137 million in ES’s case. Occidental Petroleum Corporation (NYSE:OXY) is the most popular stock in this table. On the other hand PACCAR Inc (NASDAQ:PCAR) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Eversource Energy (NYSE:ES) is even less popular than PCAR. Our overall hedge fund sentiment score for ES is 22.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on ES as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on ES as the stock returned 12% since Q3 (through December 31st) and outperformed the market by an even larger margin.
Follow Energysolutions Inc. (NYSE:ES)
Follow Energysolutions Inc. (NYSE:ES)
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Disclosure: None. This article was originally published at Insider Monkey.
