Should You Buy Shares of TECO Energy, Inc. (TE)?

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last 12 months ending in October 30. Sixty three percent of these 30 stocks outperformed the market. Although the elite funds occasionally have their duds, such as Micron and Anadarko Petroleum, which fell 50% and 26%, respectively, during the same time period, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of TECO Energy, Inc. (NYSE:TE).

TECO Energy, Inc. (NYSE:TE) shareholders have witnessed an increase in enthusiasm from smart money in recent months. TECO Energy, Inc. (NYSE:TE) was in 20 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with TECO Energy, Inc. (NYSE:TE) positions at the end of the previous quarter. At the end of this article, we will also compare TECO Energy, Inc. (NYSE:TE) to other stocks, including Qihoo 360 Technology Co Ltd (NYSE:QIHU), Mid America Apartment Communities Inc (NYSE:MAA), and Rite Aid Corporation (NYSE:RAD) to get a better sense of its popularity.

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According to most stock holders, hedge funds are perceived as slow, outdated investment tools of yesteryear. While there are over 8000 funds in operation today, our experts look at the upper echelon of this club, about 700 funds. It is estimated that this group of investors orchestrate the lion’s share of all hedge funds’ total asset base, and by paying attention to their unrivaled stock picks, Insider Monkey has discovered a number of investment strategies that have historically surpassed the broader indices. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Keeping this in mind, let’s go over the latest action surrounding TECO Energy, Inc. (NYSE:TE).

What does the smart money think about TECO Energy, Inc. (NYSE:TE)?

Heading into Q4, a total of 20 of the hedge funds tracked by Insider Monkey were long in this stock, an increase of 82% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

When looking at the hedgies followed by Insider Monkey, Alec Litowitz and Ross Laser’s Magnetar Capital had the biggest position in TECO Energy, Inc. (NYSE:TE), worth close to $51.7 million, accounting for 1.3% of its total 13F portfolio. The second most bullish hedge fund manager is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $35.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Renaissance Technologies, Israel Englander’s Millennium Management and Matthew Tewksbury’s Stevens Capital Management.

With a general bullishness amongst the heavyweights, key money managers have jumped into TECO Energy, Inc. (NYSE:TE) headfirst. Magnetar Capital, managed by Alec Litowitz and Ross Laser, initiated the biggest position in TECO Energy, Inc. (NYSE:TE), while Adage Capital Management also added the stock to its portfolio during the third quarter. The other funds with brand new TE positions are Stevens Capital Management, Matthew Halbower’s Pentwater Capital Management, and Millennium Management Subsidiary’s Green Arrow Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as TECO Energy, Inc. (NYSE:TE) but similarly valued. These stocks are Qihoo 360 Technology Co Ltd (NYSE:QIHU), Mid America Apartment Communities Inc (NYSE:MAA), Rite Aid Corporation (NYSE:RAD), and Zayo Group Holdings Inc (NYSE:ZAYO). This group of stocks’ market valuations are similar to TECO Energy, Inc. (NYSE:TE)’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QIHU 19 285259 -13
MAA 18 248346 2
RAD 46 1003793 -9
ZAYO 22 344508 1

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $470 million, as compared to $175 millions in TECO Energy, Inc. (NYSE:TE)’s case. Rite Aid Corporation (NYSE:RAD) is the most popular stock in this table with 46 funds holding shares as of September 30. TECO Energy, Inc. (NYSE:TE) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Rite Aid Corporation (NYSE:RAD) might be a better candidate to consider a long position.