Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Dominion Resources, Inc. (NYSE:D).
Dominion Resources, Inc. (NYSE:D) shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. Our calculations also showed that D isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are a large number of tools stock market investors put to use to grade stocks. A pair of the less known tools are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite money managers can outperform their index-focused peers by a solid amount (see the details here).
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now we’re going to review the fresh hedge fund action surrounding Dominion Resources, Inc. (NYSE:D).
What does smart money think about Dominion Resources, Inc. (NYSE:D)?
At the end of the fourth quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. On the other hand, there were a total of 37 hedge funds with a bullish position in D a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Dominion Resources, Inc. (NYSE:D), with a stake worth $172 million reported as of the end of September. Trailing Citadel Investment Group was Adage Capital Management, which amassed a stake valued at $128.6 million. AQR Capital Management, Electron Capital Partners, and Schonfeld Strategic Advisors 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 Electron Capital Partners allocated the biggest weight to Dominion Resources, Inc. (NYSE:D), around 10.46% of its 13F portfolio. Shelter Harbor Advisors is also relatively very bullish on the stock, designating 3.67 percent of its 13F equity portfolio to D.
Due to the fact that Dominion Resources, Inc. (NYSE:D) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that slashed their positions entirely heading into Q4. It’s worth mentioning that Stuart J. Zimmer’s Zimmer Partners said goodbye to the biggest stake of all the hedgies tracked by Insider Monkey, valued at close to $171.8 million in stock. Jonathan Barrett and Paul Segal’s fund, Luminus Management, also sold off its stock, about $19.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 8 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to Dominion Resources, Inc. (NYSE:D). These stocks are Intuitive Surgical, Inc. (NASDAQ:ISRG), Intuit Inc. (NASDAQ:INTU), Vale SA (NYSE:VALE), and The Blackstone Group L.P. (NYSE:BX). This group of stocks’ market caps are closest to D’s market cap.
|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 44.5 hedge funds with bullish positions and the average amount invested in these stocks was $1444 million. That figure was $773 million in D’s case. Intuit Inc. (NASDAQ:INTU) is the most popular stock in this table. On the other hand Vale SA (NYSE:VALE) is the least popular one with only 26 bullish hedge fund positions. Dominion Resources, Inc. (NYSE:D) is not the least popular stock in this group but hedge fund interest is still below average. 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 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on D as the stock returned -3.6% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.