NextEra Energy, Inc. (NEE): Hedge Funds Are Cashing Out

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 873 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article we look at what those investors think of NextEra Energy, Inc. (NYSE:NEE).

NextEra Energy, Inc. (NYSE:NEE) shareholders have witnessed a decrease in hedge fund interest recently. NextEra Energy, Inc. (NYSE:NEE) was in 59 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 64. Our calculations also showed that NEE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. With all of this in mind we’re going to take a glance at the new hedge fund action regarding NextEra Energy, Inc. (NYSE:NEE).

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

At Q2’s end, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. By comparison, 55 hedge funds held shares or bullish call options in NEE a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

The largest stake in NextEra Energy, Inc. (NYSE:NEE) was held by Fisher Asset Management, which reported holding $1037.1 million worth of stock at the end of June. It was followed by D E Shaw with a $350 million position. Other investors bullish on the company included Adage Capital Management, Millennium Management, and AQR Capital Management. In terms of the portfolio weights assigned to each position Coann Capital allocated the biggest weight to NextEra Energy, Inc. (NYSE:NEE), around 4.55% of its 13F portfolio. Engine No. 1 LLC is also relatively very bullish on the stock, setting aside 3.93 percent of its 13F equity portfolio to NEE.

Judging by the fact that NextEra Energy, Inc. (NYSE:NEE) has faced declining sentiment from the smart money, logic holds that there were a few hedgies that slashed their positions entirely heading into Q3. It’s worth mentioning that Steve Cohen’s Point72 Asset Management dumped the largest stake of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $95.2 million in stock. Brandon Haley’s fund, Holocene Advisors, also dropped its stock, about $50.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 4 funds heading into Q3.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as NextEra Energy, Inc. (NYSE:NEE) but similarly valued. These stocks are Anheuser-Busch InBev SA/NV (NYSE:BUD), The Boeing Company (NYSE:BA), Amgen, Inc. (NASDAQ:AMGN), The Charles Schwab Corporation (NYSE:SCHW), Lowe’s Companies, Inc. (NYSE:LOW), Rio Tinto Group (NYSE:RIO), and HDFC Bank Limited (NYSE:HDB). This group of stocks’ market valuations are similar to NEE’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.4 hedge funds with bullish positions and the average amount invested in these stocks was $2461 million. That figure was $2687 million in NEE’s case. The Charles Schwab Corporation (NYSE:SCHW) is the most popular stock in this table. On the other hand Anheuser-Busch InBev SA/NV (NYSE:BUD) is the least popular one with only 18 bullish hedge fund positions. NextEra Energy, Inc. (NYSE:NEE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NEE is 66.6. 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. 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 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. Hedge funds were also right about betting on NEE as the stock returned 8% since the end of Q2 (through 9/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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