At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Dominion Energy Inc. (NYSE:D) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Is Dominion Energy Inc. (NYSE:D) a healthy stock for your portfolio? Investors who are in the know were getting less bullish. The number of bullish hedge fund bets retreated by 1 recently. Dominion Energy Inc. (NYSE:D) was in 33 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 45. Our calculations also showed that D isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a glance at the key hedge fund action regarding Dominion Energy Inc. (NYSE:D).
Hedge fund activity in Dominion Energy Inc. (NYSE:D)
At the end of the second quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in D over the last 20 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.
The largest stake in Dominion Energy Inc. (NYSE:D) was held by D E Shaw, which reported holding $83.8 million worth of stock at the end of September. It was followed by AQR Capital Management with a $80.6 million position. Other investors bullish on the company included Adage Capital Management, Citadel Investment Group, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Ecofin Ltd allocated the biggest weight to Dominion Energy Inc. (NYSE:D), around 2.66% of its 13F portfolio. Beech Hill Partners is also relatively very bullish on the stock, dishing out 1.15 percent of its 13F equity portfolio to D.
Because Dominion Energy Inc. (NYSE:D) has witnessed declining sentiment from the smart money, it’s safe to say that there were a few money managers who were dropping their entire stakes heading into Q3. Intriguingly, Ken Griffin’s Citadel Investment Group sold off the biggest investment of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $29.9 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund cut about $2.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds heading into Q3.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Dominion Energy Inc. (NYSE:D) but similarly valued. We will take a look at Goldman Sachs Group, Inc. (NYSE:GS), The Estee Lauder Companies Inc (NYSE:EL), The Blackstone Group Inc. (NYSE:BX), Stryker Corporation (NYSE:SYK), Intuitive Surgical, Inc. (NASDAQ:ISRG), Anthem Inc (NYSE:ANTM), and Fiserv, Inc. (NASDAQ:FISV). All of these stocks’ market caps are closest to D’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 58.4 hedge funds with bullish positions and the average amount invested in these stocks was $2468 million. That figure was $366 million in D’s case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Intuitive Surgical, Inc. (NASDAQ:ISRG) is the least popular one with only 43 bullish hedge fund positions. Compared to these stocks Dominion Energy Inc. (NYSE:D) is even less popular than ISRG. Our overall hedge fund sentiment score for D is 14.1. 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 dodged a bullet by taking a bearish stance towards D. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August but managed to beat the market by 23.2 percentage points. Unfortunately D wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); D investors were disappointed as the stock returned -3.4% since Q2 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.