Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
Dominion Resources, Inc. (NYSE:D) investors should pay attention to a decrease in hedge fund sentiment recently. Our calculations also showed that D isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to review the fresh hedge fund action encompassing Dominion Resources, Inc. (NYSE:D).
How have hedgies been trading Dominion Resources, Inc. (NYSE:D)?
At Q1’s end, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards D over the last 15 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Dominion Resources, Inc. (NYSE:D) was held by Luminus Management, which reported holding $144 million worth of stock at the end of March. It was followed by Zimmer Partners with a $139.9 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Electron Capital Partners.
Since Dominion Resources, Inc. (NYSE:D) has faced falling interest from the smart money, it’s easy to see that there were a few funds that slashed their full holdings heading into Q3. Interestingly, Jim Simons’s Renaissance Technologies cut the biggest investment of all the hedgies tracked by Insider Monkey, totaling close to $29.1 million in stock, and Bart Baum’s Ionic Capital Management was right behind this move, as the fund cut about $8.4 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 1 funds heading into Q3.
Let’s go over hedge fund activity in other stocks similar to Dominion Resources, Inc. (NYSE:D). These stocks are CIGNA Corporation (NYSE:CI), CSX Corporation (NYSE:CSX), Schlumberger Limited. (NYSE:SLB), and The Estee Lauder Companies Inc (NYSE:EL). This group of stocks’ market values resemble D’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 44.75 hedge funds with bullish positions and the average amount invested in these stocks was $3025 million. That figure was $973 million in D’s case. Schlumberger Limited. (NYSE:SLB) is the most popular stock in this table. On the other hand The Estee Lauder Companies Inc (NYSE:EL) is the least popular one with only 39 bullish hedge fund positions. Compared to these stocks Dominion Resources, Inc. (NYSE:D) is even less popular than EL. Hedge funds dodged a bullet by taking a bearish stance towards D. Our calculations showed that the top 15 most popular hedge fund stocks returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately D wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); D investors were disappointed as the stock returned -3.1% during the same time frame and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.