Is NEP A Good Stock To Buy Now According To Hedge Funds?

We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Nextera Energy Partners LP (NYSE:NEP) based on that data.

Is NEP a good stock to buy now? The best stock pickers were in an optimistic mood. The number of long hedge fund positions inched up by 1 lately. Nextera Energy Partners LP (NYSE:NEP) was in 22 hedge funds’ portfolios at the end of September. The all time high for this statistic is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NEP 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.

In the eyes of most investors, hedge funds are assumed to be underperforming, old investment tools of the past. While there are greater than 8000 funds in operation at present, Our researchers choose to focus on the aristocrats of this group, approximately 850 funds. These hedge fund managers have their hands on the majority of the hedge fund industry’s total asset base, and by tailing their inimitable picks, Insider Monkey has spotted several investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .


James Dinan of York Capital Management

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 let’s check out the latest hedge fund action surrounding Nextera Energy Partners LP (NYSE:NEP).

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

At the end of September, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NEP 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.

Is NEP A Good Stock To Buy?

More specifically, Electron Capital Partners was the largest shareholder of Nextera Energy Partners LP (NYSE:NEP), with a stake worth $66.4 million reported as of the end of September. Trailing Electron Capital Partners was York Capital Management, which amassed a stake valued at $30.1 million. Renaissance Technologies, Holocene Advisors, and Millennium Management 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 Electron Capital Partners allocated the biggest weight to Nextera Energy Partners LP (NYSE:NEP), around 4.59% of its 13F portfolio. Ecofin Ltd is also relatively very bullish on the stock, designating 2.95 percent of its 13F equity portfolio to NEP.

As aggregate interest increased, specific money managers have been driving this bullishness. York Capital Management, managed by James Dinan, created the most outsized position in Nextera Energy Partners LP (NYSE:NEP). York Capital Management had $30.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $10.2 million investment in the stock during the quarter. The other funds with brand new NEP positions are Noam Gottesman’s GLG Partners, Tony Davis’s Inherent Group, and Stuart J. Zimmer’s Zimmer Partners.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Nextera Energy Partners LP (NYSE:NEP) but similarly valued. These stocks are Graphic Packaging Holding Company (NYSE:GPK), NovaGold Resources Inc. (NYSE:NG), Lattice Semiconductor Corporation (NASDAQ:LSCC), TFI International Inc. (NYSE:TFII), Gildan Activewear Inc (NYSE:GIL), CAE, Inc. (NYSE:CAE), and Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN). This group of stocks’ market caps are similar to NEP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GPK 30 311941 -2
NG 19 466079 -4
LSCC 24 135268 5
TFII 13 116787 3
GIL 18 522441 -4
CAE 12 88171 -2
BHVN 33 751815 -9
Average 21.3 341786 -1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.3 hedge funds with bullish positions and the average amount invested in these stocks was $342 million. That figure was $218 million in NEP’s case. Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is the most popular stock in this table. On the other hand CAE, Inc. (NYSE:CAE) is the least popular one with only 12 bullish hedge fund positions. Nextera Energy Partners LP (NYSE:NEP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NEP is 59.8. 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 positive signal but 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 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately NEP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NEP were disappointed as the stock returned 5.9% since the end of September (through 12/14) 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 many of these stocks already outperformed the market so far this year.

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