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Hedge Funds Too Early To Pile Into FirstEnergy Corp. (FE)?

The latest 13F reporting period has come and gone, and 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. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtFirstEnergy Corp. (NYSE:FE) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

FirstEnergy Corp. (NYSE:FE) was in 44 hedge funds’ portfolios at the end of March. FE has seen an increase in support from the world’s most elite money managers of late. There were 40 hedge funds in our database with FE holdings at the end of the previous quarter. Our calculations also showed that FE 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.

To the average investor there are dozens of gauges shareholders employ to assess their stock investments. A couple of the less utilized gauges are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can trounce the broader indices by a very impressive margin (see the details here).

Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the latest hedge fund action regarding FirstEnergy Corp. (NYSE:FE).

How are hedge funds trading FirstEnergy Corp. (NYSE:FE)?

Heading into the second quarter of 2020, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FE over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

The largest stake in FirstEnergy Corp. (NYSE:FE) was held by Renaissance Technologies, which reported holding $482.2 million worth of stock at the end of September. It was followed by Zimmer Partners with a $175.4 million position. Other investors bullish on the company included D E Shaw, Two Sigma Advisors, and Adage Capital Management. In terms of the portfolio weights assigned to each position Serengeti Asset Management allocated the biggest weight to FirstEnergy Corp. (NYSE:FE), around 13.16% of its 13F portfolio. Covalis Capital is also relatively very bullish on the stock, dishing out 9.45 percent of its 13F equity portfolio to FE.

As aggregate interest increased, specific money managers were breaking ground themselves. Kingstown Capital Management, managed by Michael Blitzer, assembled the biggest position in FirstEnergy Corp. (NYSE:FE). Kingstown Capital Management had $40.1 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers’s Castle Hook Partners also made a $31.4 million investment in the stock during the quarter. The following funds were also among the new FE investors: Zilvinas Mecelis’s Covalis Capital, Clint Carlson’s Carlson Capital, and Andrew Kurita’s Kettle Hill Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as FirstEnergy Corp. (NYSE:FE) but similarly valued. We will take a look at The Clorox Company (NYSE:CLX), American Water Works Company, Inc. (NYSE:AWK), CoStar Group Inc (NASDAQ:CSGP), and V.F. Corporation (NYSE:VFC). All of these stocks’ market caps are closest to FE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CLX 41 2343925 14
AWK 30 633418 1
CSGP 40 1689677 -4
VFC 19 171262 -10
Average 32.5 1209571 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $1210 million. That figure was $1210 million in FE’s case. The Clorox Company (NYSE:CLX) is the most popular stock in this table. On the other hand V.F. Corporation (NYSE:VFC) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks FirstEnergy Corp. (NYSE:FE) is more popular among hedge funds. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately FE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FE were disappointed as the stock returned -2.3% 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.