Hedge Funds Are Selling Sempra Energy (SRE)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Sempra Energy (NYSE:SRE) in this article.

Is Sempra Energy (NYSE:SRE) the right pick for your portfolio? Investors who are in the know were getting less optimistic. The number of bullish hedge fund bets dropped by 6 lately. Sempra Energy (NYSE:SRE) was in 27 hedge funds’ portfolios at the end of March. The all time high for this statistic is 35. Our calculations also showed that SRE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 33 hedge funds in our database with SRE positions at the end of the fourth quarter.

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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s go over the fresh hedge fund action encompassing Sempra Energy (NYSE:SRE).

Do Hedge Funds Think SRE Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in SRE over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SRE A Good Stock To Buy?

Among these funds, Citadel Investment Group held the most valuable stake in Sempra Energy (NYSE:SRE), which was worth $143.8 million at the end of the fourth quarter. On the second spot was Adage Capital Management which amassed $137.2 million worth of shares. D E Shaw, AQR Capital Management, and Point72 Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Coann Capital allocated the biggest weight to Sempra Energy (NYSE:SRE), around 5.23% of its 13F portfolio. Socorro Asset Management is also relatively very bullish on the stock, dishing out 3.32 percent of its 13F equity portfolio to SRE.

Seeing as Sempra Energy (NYSE:SRE) has witnessed falling interest from the smart money, it’s easy to see that there were a few hedgies who sold off their entire stakes in the first quarter. Intriguingly, Michael Gelband’s ExodusPoint Capital dumped the largest stake of the 750 funds tracked by Insider Monkey, valued at about $17.4 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dumped about $3.5 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 6 funds in the first quarter.

Let’s check out hedge fund activity in other stocks similar to Sempra Energy (NYSE:SRE). These stocks are Chipotle Mexican Grill, Inc. (NYSE:CMG), Lululemon Athletica inc. (NASDAQ:LULU), American International Group Inc (NYSE:AIG), Digital Realty Trust, Inc. (NYSE:DLR), HP Inc. (NYSE:HPQ), Veeva Systems Inc (NYSE:VEEV), and Amphenol Corporation (NYSE:APH). This group of stocks’ market caps resemble SRE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CMG 41 3037666 6
LULU 41 751855 -9
AIG 33 2471193 -8
DLR 22 296357 -1
HPQ 43 1526496 4
VEEV 39 966072 3
APH 42 1077461 1
Average 37.3 1446729 -0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.3 hedge funds with bullish positions and the average amount invested in these stocks was $1447 million. That figure was $597 million in SRE’s case. HP Inc. (NYSE:HPQ) is the most popular stock in this table. On the other hand Digital Realty Trust, Inc. (NYSE:DLR) is the least popular one with only 22 bullish hedge fund positions. Sempra Energy (NYSE:SRE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SRE is 34. 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. 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 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 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately SRE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SRE investors were disappointed as the stock returned 1% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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