Is DTE Energy Company (DTE) Going to Burn These Hedge Funds?

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 DTE Energy Company (NYSE:DTE).

Is DTE Energy Company (NYSE:DTE) going to take off soon? Prominent investors are in a bearish mood. The number of long hedge fund positions went down by 8 lately. Our calculations also showed that DTE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). DTE was in 20 hedge funds’ portfolios at the end of the third quarter of 2019. There were 28 hedge funds in our database with DTE positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the recent hedge fund action surrounding DTE Energy Company (NYSE:DTE).

How have hedgies been trading DTE Energy Company (NYSE:DTE)?

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DTE over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, AQR Capital Management held the most valuable stake in DTE Energy Company (NYSE:DTE), which was worth $216.4 million at the end of the third quarter. On the second spot was Millennium Management which amassed $92.8 million worth of shares. Renaissance Technologies, Zimmer Partners, and Two Sigma 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 Ecofin Ltd allocated the biggest weight to DTE Energy Company (NYSE:DTE), around 2.39% of its 13F portfolio. Carlson Capital is also relatively very bullish on the stock, earmarking 0.81 percent of its 13F equity portfolio to DTE.

Because DTE Energy Company (NYSE:DTE) has faced falling interest from the aggregate hedge fund industry, we can see that there is a sect of fund managers who sold off their full holdings last quarter. Interestingly, Sara Nainzadeh’s Centenus Global Management dumped the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $25.6 million in stock. Sculptor Capital, also said goodbye to its stock, about $23.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as DTE Energy Company (NYSE:DTE) but similarly valued. These stocks are Waste Connections, Inc. (NYSE:WCN), PACCAR Inc (NASDAQ:PCAR), Xilinx, Inc. (NASDAQ:XLNX), and Ball Corporation (NYSE:BLL). This group of stocks’ market caps resemble DTE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WCN 29 575449 3
PCAR 25 193757 -2
XLNX 38 1040263 -1
BLL 28 556069 1
Average 30 591385 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $591 million. That figure was $679 million in DTE’s case. Xilinx, Inc. (NASDAQ:XLNX) is the most popular stock in this table. On the other hand PACCAR Inc (NASDAQ:PCAR) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks DTE Energy Company (NYSE:DTE) is even less popular than PCAR. Hedge funds dodged a bullet by taking a bearish stance towards DTE. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately DTE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); DTE investors were disappointed as the stock returned -6% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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