Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Duke Energy Corporation (NYSE:DUK) based on those filings.
Duke Energy Corporation (NYSE:DUK) investors should pay attention to an increase in support from the world’s most elite money managers lately. DUK was in 37 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 32 hedge funds in our database with DUK holdings 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 Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to 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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Tudor Jones of Tudor Investment Corp
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s analyze the recent hedge fund action encompassing Duke Energy Corporation (NYSE:DUK).
What have hedge funds been doing with Duke Energy Corporation (NYSE:DUK)?
Heading into the first quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DUK over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, founded by Jim Simons, holds the biggest position in Duke Energy Corporation (NYSE:DUK). Renaissance Technologies has a $569.2 million position in the stock, comprising 0.4% of its 13F portfolio. On Renaissance Technologies’s heels is Ken Griffin of Citadel Investment Group, with a $196.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass 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 Blackstart Capital allocated the biggest weight to Duke Energy Corporation (NYSE:DUK), around 6.52% of its 13F portfolio. Electron Capital Partners is also relatively very bullish on the stock, earmarking 6.43 percent of its 13F equity portfolio to DUK.
Consequently, key hedge funds have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, created the largest position in Duke Energy Corporation (NYSE:DUK). Point72 Asset Management had $34 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $12.7 million position during the quarter. The other funds with new positions in the stock are Brandon Haley’s Holocene Advisors, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Duke Energy Corporation (NYSE:DUK) but similarly valued. These stocks are Equinor ASA (NYSE:EQNR), Target Corporation (NYSE:TGT), Canadian National Railway Company (NYSE:CNI), and Zoetis Inc (NYSE:ZTS). This group of stocks’ market caps are closest to DUK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EQNR | 14 | 424786 | -1 |
| TGT | 53 | 2495450 | -2 |
| CNI | 29 | 2000657 | 0 |
| ZTS | 48 | 2230316 | -5 |
| Average | 36 | 1787802 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1788 million. That figure was $1535 million in DUK’s case. Target Corporation (NYSE:TGT) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 14 bullish hedge fund positions. Duke Energy Corporation (NYSE:DUK) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. Hedge funds were also right about betting on DUK as the stock returned 0.7% during the first quarter (through March 11th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
