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Hedge Funds Not In the Mood To Gamble With Sempra Energy (SRE)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Sempra Energy (NYSE:SRE).

Sempra Energy (NYSE:SRE) shareholders have witnessed a decrease in hedge fund interest lately. Our calculations also showed that SRE isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Today there are many tools investors have at their disposal to value their stock investments. Two of the most useful tools are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can outpace their index-focused peers by a significant amount (see the details here).

BRIDGEWATER ASSOCIATES

Ray Dalio of Bridgewater Associates

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the key hedge fund action surrounding Sempra Energy (NYSE:SRE).

What have hedge funds been doing with Sempra Energy (NYSE:SRE)?

At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in SRE over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, D E Shaw held the most valuable stake in Sempra Energy (NYSE:SRE), which was worth $141.6 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $113.9 million worth of shares. AQR Capital Management, Renaissance Technologies, and D E Shaw 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 Ecofin Ltd allocated the biggest weight to Sempra Energy (NYSE:SRE), around 1.61% of its 13F portfolio. Highbridge Capital Management is also relatively very bullish on the stock, designating 1.25 percent of its 13F equity portfolio to SRE.

Seeing as Sempra Energy (NYSE:SRE) has experienced falling interest from hedge fund managers, we can see that there exists a select few hedge funds that elected to cut their entire stakes in the first quarter. At the top of the heap, Clint Carlson’s Carlson Capital dropped the biggest stake of the 750 funds tracked by Insider Monkey, valued at an estimated $47.6 million in stock. Noam Gottesman’s fund, GLG Partners, also sold off its stock, about $13.9 million worth. These moves are interesting, as total hedge fund interest was cut by 8 funds in the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Sempra Energy (NYSE:SRE) but similarly valued. These stocks are Analog Devices, Inc. (NASDAQ:ADI), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), Banco Bradesco SA (NYSE:BBD), and Barrick Gold Corporation (NYSE:GOLD). This group of stocks’ market caps are closest to SRE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ADI 45 1979695 -6
SMFG 10 104520 -1
BBD 15 246087 -3
GOLD 54 1756373 3
Average 31 1021669 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1022 million. That figure was $505 million in SRE’s case. Barrick Gold Corporation (NYSE:GOLD) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 10 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately SRE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SRE investors were disappointed as the stock returned 11.8% during the second quarter 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 in 2020.

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