Is Eversource Energy (ES) Going to Burn These Hedge Funds?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Eversource Energy (NYSE:ES).

Eversource Energy (NYSE:ES) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 24 hedge funds’ portfolios at the end of March. Our calculations also showed that ES isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Sun Life Financial Inc. (NYSE:SLF), State Street Corporation (NYSE:STT), and WEC Energy Group, Inc. (NYSE:WEC) to gather more data points.

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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a glance at the latest hedge fund action encompassing Eversource Energy (NYSE:ES).

Do Hedge Funds Think ES Is A Good Stock To Buy Now?

At first quarter’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 26 hedge funds with a bullish position in ES a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Citadel Investment Group held the most valuable stake in Eversource Energy (NYSE:ES), which was worth $154.5 million at the end of the fourth quarter. On the second spot was Zimmer Partners which amassed $88.3 million worth of shares. D E Shaw, AQR Capital Management, 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 Coann Capital allocated the biggest weight to Eversource Energy (NYSE:ES), around 10.04% of its 13F portfolio. Yaupon Capital is also relatively very bullish on the stock, dishing out 1.84 percent of its 13F equity portfolio to ES.

Due to the fact that Eversource Energy (NYSE:ES) has faced falling interest from the aggregate hedge fund industry, logic holds that there exists a select few funds that decided to sell off their entire stakes by the end of the first quarter. Interestingly, Phill Gross and Robert Atchinson’s Adage Capital Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, valued at close to $33.1 million in stock. Renaissance Technologies, also said goodbye to its stock, about $15.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Eversource Energy (NYSE:ES) but similarly valued. We will take a look at Sun Life Financial Inc. (NYSE:SLF), State Street Corporation (NYSE:STT), WEC Energy Group, Inc. (NYSE:WEC), Willis Towers Watson Public Limited Company (NASDAQ:WLTW), AMETEK, Inc. (NYSE:AME), ANSYS, Inc. (NASDAQ:ANSS), and Otis Worldwide Corporation (NYSE:OTIS). This group of stocks’ market values resemble ES’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SLF 17 139250 -2
STT 32 866316 1
WEC 17 184448 -8
WLTW 66 5189453 8
AME 32 909796 1
ANSS 33 1503462 -7
OTIS 52 2750826 -7
Average 35.6 1649079 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.6 hedge funds with bullish positions and the average amount invested in these stocks was $1649 million. That figure was $421 million in ES’s case. Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is the most popular stock in this table. On the other hand Sun Life Financial Inc. (NYSE:SLF) is the least popular one with only 17 bullish hedge fund positions. Eversource Energy (NYSE:ES) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ES is 37.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately ES wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ES investors were disappointed as the stock returned 1.6% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

Follow Energysolutions Inc. (NYSE:ES)

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