We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
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 Eversource Energy (NYSE:ES) based on those filings.
Eversource Energy (NYSE:ES) was in 24 hedge funds’ portfolios at the end of the fourth quarter of 2019. ES shareholders have witnessed an increase in enthusiasm from smart money in recent months. There were 22 hedge funds in our database with ES positions at the end of the previous quarter. Our calculations also showed that ES isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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.
Phill Gross of Adage Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the new hedge fund action encompassing Eversource Energy (NYSE:ES).
Hedge fund activity in Eversource Energy (NYSE:ES)
At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in ES a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Eversource Energy (NYSE:ES) was held by Zimmer Partners, which reported holding $140.4 million worth of stock at the end of September. It was followed by AQR Capital Management with a $81.9 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and 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 2.93% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, earmarking 1.94 percent of its 13F equity portfolio to ES.
Now, key money managers were breaking ground themselves. Paloma Partners, managed by Donald Sussman, initiated the biggest position in Eversource Energy (NYSE:ES). Paloma Partners had $22 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $5.3 million investment in the stock during the quarter. The following funds were also among the new ES investors: Qing Li’s Sciencast Management, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Jinghua Yan’s TwinBeech Capital.
Let’s now review hedge fund activity in other stocks similar to Eversource Energy (NYSE:ES). These stocks are Nutrien Ltd. (NYSE:NTR), Cummins Inc. (NYSE:CMI), PACCAR Inc (NASDAQ:PCAR), and SBA Communications Corporation (NASDAQ:SBAC). This group of stocks’ market caps match ES’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NTR | 28 | 408982 | 0 |
| CMI | 39 | 768817 | 5 |
| PCAR | 36 | 216367 | 8 |
| SBAC | 45 | 1560377 | 4 |
| Average | 37 | 738636 | 4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $739 million. That figure was $453 million in ES’s case. SBA Communications Corporation (NASDAQ:SBAC) is the most popular stock in this table. On the other hand Nutrien Ltd. (NYSE:NTR) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Eversource Energy (NYSE:ES) is even less popular than NTR. 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 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 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on ES as the stock returned -15% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
