At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not MGE Energy, Inc. (NASDAQ:MGEE) makes for a good investment right now.
Is MGE Energy (MGEE) a good stock to buy now? MGEE shareholders have witnessed an increase in enthusiasm from smart money recently. MGE Energy, Inc. (NASDAQ:MGEE) was in 6 hedge funds’ portfolios at the end of September. The all time high for this statistics is 14. Our calculations also showed that MGEE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we’re going to take a look at the new hedge fund action surrounding MGE Energy, Inc. (NASDAQ:MGEE).
Hedge fund activity in MGE Energy, Inc. (NASDAQ:MGEE)
Heading into the fourth quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MGEE over the last 21 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, Zimmer Partners was the largest shareholder of MGE Energy, Inc. (NASDAQ:MGEE), with a stake worth $49.4 million reported as of the end of September. Trailing Zimmer Partners was Renaissance Technologies, which amassed a stake valued at $14.3 million. Millennium Management, AQR Capital Management, and LMR Partners 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 Zimmer Partners allocated the biggest weight to MGE Energy, Inc. (NASDAQ:MGEE), around 0.76% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.15 percent of its 13F equity portfolio to MGEE.
Now, key hedge funds were leading the bulls’ herd. Millennium Management, managed by Israel Englander, created the largest position in MGE Energy, Inc. (NASDAQ:MGEE). Millennium Management had $0.9 million invested in the company at the end of the quarter. Hoon Kim’s Quantinno Capital also initiated a $0.2 million position during the quarter.
Let’s go over hedge fund activity in other stocks similar to MGE Energy, Inc. (NASDAQ:MGEE). These stocks are Silk Road Medical, Inc. (NASDAQ:SILK), National Storage Affiliates Trust (NYSE:NSA), IGM Biosciences, Inc. (NASDAQ:IGMS), Coca-Cola Consolidated Inc. (NASDAQ:COKE), Aimmune Therapeutics Inc (NASDAQ:AIMT), ExlService Holdings, Inc. (NASDAQ:EXLS), and CVB Financial Corp. (NASDAQ:CVBF). This group of stocks’ market valuations match MGEE’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 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $219 million. That figure was $66 million in MGEE’s case. Aimmune Therapeutics Inc (NASDAQ:AIMT) is the most popular stock in this table. On the other hand Coca-Cola Consolidated Inc. (NASDAQ:COKE) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks MGE Energy, Inc. (NASDAQ:MGEE) is even less popular than COKE. Our overall hedge fund sentiment score for MGEE is 18.9. 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. Hedge funds clearly dropped the ball on MGEE as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on MGEE as the stock returned 13.3% since Q3 (through November 27th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.