Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 30 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 6.7% through November 15th whereas the S&P 500 Index ETF gained only 2.6% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at DTE Energy Company (NYSE:DTE) from the perspective of those elite funds.
DTE Energy Company (NYSE:DTE) was in 25 hedge funds’ portfolios at the end of September. DTE investors should be aware of an increase in hedge fund interest lately. There were 20 hedge funds in our database with DTE holdings at the end of the previous quarter. Our calculations also showed that DTE isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
We’re going to analyze the recent hedge fund action encompassing DTE Energy Company (NYSE:DTE).
What have hedge funds been doing with DTE Energy Company (NYSE:DTE)?
Heading into the fourth quarter of 2018, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DTE over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in DTE Energy Company (NYSE:DTE) was held by Renaissance Technologies, which reported holding $324.1 million worth of stock at the end of September. It was followed by AQR Capital Management with a $159.4 million position. Other investors bullish on the company included Millennium Management, Adage Capital Management, and Two Sigma Advisors.
As industrywide interest jumped, specific money managers have been driving this bullishness. Shelter Harbor Advisors, managed by Peter J. Hark, assembled the biggest position in DTE Energy Company (NYSE:DTE). Shelter Harbor Advisors had $2.7 million invested in the company at the end of the quarter. George Hall’s Clinton Group also initiated a $2 million position during the quarter. The other funds with brand new DTE positions are Jeffrey Talpins’s Element Capital Management, Daniel Arbess’s Perella Weinberg Partners, and George Zweig, Shane Haas and Ravi Chander’s Signition LP.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as DTE Energy Company (NYSE:DTE) but similarly valued. These stocks are Tenaris S.A. (NYSE:TS), Regions Financial Corporation (NYSE:RF), TransDigm Group Incorporated (NYSE:TDG), and Verisign, Inc. (NASDAQ:VRSN). This group of stocks’ market caps match DTE’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 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $2.59 billion. That figure was $706 million in DTE’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand Tenaris S.A. (NYSE:TS) is the least popular one with only 18 bullish hedge fund positions. DTE Energy Company (NYSE:DTE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TDG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.