A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on The Southern Company (NYSE:SO).
The Southern Company (NYSE:SO) has experienced a decrease in activity from the world’s largest hedge funds recently. SO was in 20 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 24 hedge funds in our database with SO holdings at the end of the previous quarter. Our calculations also showed that SO isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s review the fresh hedge fund action regarding The Southern Company (NYSE:SO).
How have hedgies been trading The Southern Company (NYSE:SO)?
Heading into the first quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SO over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of The Southern Company (NYSE:SO), with a stake worth $366.2 million reported as of the end of September. Trailing Renaissance Technologies was Zimmer Partners, which amassed a stake valued at $84.5 million. D E Shaw, Ariel Investments, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as The Southern Company (NYSE:SO) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers who were dropping their full holdings heading into Q3. Interestingly, Jonathan Barrett and Paul Segal’s Luminus Management dumped the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $30.1 million in call options, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund sold off about $28.4 million worth. These moves are important to note, as total hedge fund interest dropped by 4 funds heading into Q3.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as The Southern Company (NYSE:SO) but similarly valued. We will take a look at Allergan plc (NYSE:AGN), Crown Castle International Corp. (REIT) (NYSE:CCI), Celgene Corporation (NASDAQ:CELG), and Suncor Energy Inc. (NYSE:SU). This group of stocks’ market valuations are similar to SO’s market valuation.
|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 45.75 hedge funds with bullish positions and the average amount invested in these stocks was $2648 million. That figure was $708 million in SO’s case. Allergan plc (NYSE:AGN) is the most popular stock in this table. On the other hand Suncor Energy Inc. (NYSE:SU) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks The Southern Company (NYSE:SO) is even less popular than SU. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on SO as the stock returned 19.5% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.