After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards NextEra Energy, Inc. (NYSE:NEE).
Is NEE a good stock to buy now? NextEra Energy, Inc. (NYSE:NEE) investors should pay attention to an increase in activity from the world’s largest hedge funds of late. NextEra Energy, Inc. (NYSE:NEE) was in 64 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 55. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NEE 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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. Now let’s check out the new hedge fund action regarding NextEra Energy, Inc. (NYSE:NEE).
How are hedge funds trading NextEra Energy, Inc. (NYSE:NEE)?
Heading into the fourth quarter of 2020, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the previous quarter. By comparison, 45 hedge funds held shares or bullish call options in NEE a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Fisher Asset Management, managed by Ken Fisher, holds the biggest position in NextEra Energy, Inc. (NYSE:NEE). Fisher Asset Management has a $868.6 million position in the stock, comprising 0.8% of its 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, managed by Cliff Asness, which holds a $164 million position; 0.3% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism encompass D. E. Shaw’s D E Shaw, Phill Gross and Robert Atchinson’s Adage Capital Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Ecofin Ltd allocated the biggest weight to NextEra Energy, Inc. (NYSE:NEE), around 12.81% of its 13F portfolio. Inherent Group is also relatively very bullish on the stock, dishing out 5.65 percent of its 13F equity portfolio to NEE.
Now, key money managers have jumped into NextEra Energy, Inc. (NYSE:NEE) headfirst. D E Shaw, managed by D. E. Shaw, initiated the biggest position in NextEra Energy, Inc. (NYSE:NEE). D E Shaw had $84 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $68.4 million investment in the stock during the quarter. The following funds were also among the new NEE investors: Ken Griffin’s Citadel Investment Group, Stanley Druckenmiller’s Duquesne Capital, and Doug Silverman and Alexander Klabin’s Senator Investment Group.
Let’s go over hedge fund activity in other stocks similar to NextEra Energy, Inc. (NYSE:NEE). We will take a look at Bristol Myers Squibb Company (NYSE:BMY), Chevron Corporation (NYSE:CVX), Zoom Video Communications, Inc. (NASDAQ:ZM), Union Pacific Corporation (NYSE:UNP), QUALCOMM, Incorporated (NASDAQ:QCOM), China Mobile Limited (NYSE:CHL), and Texas Instruments Incorporated (NASDAQ:TXN). This group of stocks’ market valuations resemble NEE’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 64.1 hedge funds with bullish positions and the average amount invested in these stocks was $3931 million. That figure was $2739 million in NEE’s case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand China Mobile Limited (NYSE:CHL) is the least popular one with only 10 bullish hedge fund positions. NextEra Energy, Inc. (NYSE:NEE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NEE is 63.7. 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 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 31.6% in 2020 through December 2nd and surpassed the market again by 16 percentage points. Unfortunately NEE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NEE investors were disappointed as the stock returned 7.6% since the end of September (through 12/2) 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.