Hedge Funds Dumped These Surging Stocks During Q3

#3 Reynolds American Inc. (NYSE:RAI)

-Investors with Long Positions (as of September 30): 33

-Aggregate Value of Investors’ Holdings (as of September 30): $1.95 Billion

A number of 33 hedge funds from our database had positions in Reynolds American Inc. (NYSE:RAI) at the end of the third quarter, compared with 41 registered at the end of the prior one. The nation’s second-largest tobacco company has seen its shares gain 41% this year, after advancing 19% during the third quarter. The fourth quarter has not been bad either in terms of stock performance, with Reynolds American’s shares gaining slightly more than 2% thus far. Reynolds American has three reportable operating segments, which include RJR Tobacco (generated 83% of the company’s third-quarter net sales), Santa Fe and American Snuff. In the tobacco industry, the performance of each company and brand performance is primarily assessed by looking at their market share in the industry. RJR Tobacco’s domestic cigarette share of retail shipments added up to 32.0% in the third quarter, compared with 31.8% in the same quarter last year. Reynolds American delivered strong revenue growth as well during the third quarter, as its net sales came to $3.16 billion for the quarter, up from $2.24 billion reported last year. Neil Woodford’s Woodford Investment Management acquired a new stake of 16.41 million shares in Reynolds American Inc. (NYSE:RAI) during the September quarter.

#2 Chipotle Mexican Grill Inc. (NYSE:CMG)

-Investors with Long Positions (as of September 30): 28

-Aggregate Value of Investors’ Holdings (as of September 30): $1.10 Billion

The number of smart money investors with long positions in Chipotle Mexican Grill Inc. (NYSE:CMG) shrank to 28 from 36 during the June-September period. A handful of hedge funds monitored by Insider Monkey cashed out all their holdings in the fast-casual restaurant chain at the right time, as the stock has been steadily sliding since mid-October as a result of an E. coli outbreak in Washington state and Oregon. In fact, the stock has lost 21% since the beginning of the current quarter and is down 17% for the year. It appears that the popular fast casual Mexican chain is having a hard time overcoming the recent food-related scandal, as it created a substantial negative consumer reaction. However, the shares of Chipotle are still trading at a rich trailing P/E ratio of 34.27 in spite of the recent pullback. Jim Simons’ Renaissance Technologies increased its exposure to Chipotle Mexican Grill Inc. (NYSE:CMG) by 53% during the third quarter to 479,400 shares.

#1 WEC Energy Group Inc. (NYSE:WEC)

-Investors with Long Positions (as of September 30): 14

-Aggregate Value of Investors’ Holdings (as of September 30): $57.07 Million

WEC Energy Group Inc. (NYSE:WEC) also failed to appeal the hedge fund industry during the September quarter. Actually, only 14 hedge funds observed by our team were invested in the company at the end of the third quarter, compared with 26 at the end of the previous one. Leaving all the hatred towards hedge funds aside, one should acknowledge that several smart money investors were correct on this stock as well. The shares of the energy company have lost 8% thus far in the fourth quarter, after gaining 16% during the third quarter. Earlier today, the company announced its intentions to raise its quarterly dividend to $0.495 per share in the first quarter of 2016, which denotes an increase of 3.75% over the current dividend. At the same time, WEC Energy’s management aims at targeting a dividend payout ratio of 65%-to-70% of earnings. Stuart J. Zimmer’s Zimmer Partners owns 349,000 shares of WEC Energy Group Inc. (NYSE:WEC) as of September 30.

Disclosure: None