ClearBridge Investments, an investment management company, released its “ClearBridge All Cap Value Strategy” third quarter 2023 investor letter. A copy of the same can be downloaded here. The strategy outperformed the benchmark, the Russell 3000 Value Index, in the third quarter. Favorable stock selection in the consumer discretionary, healthcare, and utilities sectors, as well as an overweight allocation to the energy sector, helped the strategy to mitigate the headwinds from financial holding. In addition, please check the fund’s top five holdings to know its best picks in 2023.
ClearBridge All Cap Value Strategy highlighted stocks like Quanta Services, Inc. (NYSE:PWR) in the third quarter 2023 investor letter. Headquartered in Houston, Texas, Quanta Services, Inc. (NYSE:PWR) offers infrastructure solutions to the electric power, oil and gas, and communication industries. On December 12, 2023, Quanta Services, Inc. (NYSE:PWR) stock closed at $205.27 per share. One-month return of Quanta Services, Inc. (NYSE:PWR) was 11.73%, and its shares gained 34.97% of their value over the last 52 weeks. Quanta Services, Inc. (NYSE:PWR) has a market capitalization of $29.823 billion.
ClearBridge All Cap Value Strategy made the following comment about Quanta Services, Inc. (NYSE:PWR) in its Q3 2023 investor letter:
“Many businesses are threatened by a higher cost of capital, but one where reality has set in, and which also touches many other growth areas of the market, is the utility company NextEra Energy. Over the past few years, the company developed into a growth darling thanks to its strong track record in renewable energy development and tailwinds from the global energy transition and incentives in the Inflation Reduction Act. The problem for NextEra, and the transition broadly, is that this transformation is immensely capital intensive and many renewables projects offer lower returns on that capital. This requires high capital expenditures – often resulting in negative free cash flow – to meet the growth and financing needs of companies like NextEra. To help, the company leaned on financial engineering by using a publicly traded limited partnership called NextEra Energy Partners, providing further capacity for its parent to continue its development plans. NEP used layers of its own financial engineering to fund its own negative free cash flow and a large, growing dividend yield that we believe it could not sustain organically. Ultimately, the higher cost of debt from rising rates led NEP to lower its own growth ambitions, driving concerns about whether NextEra can execute on its extensive backlog. As a result, the stock has declined by approximately 30% year to date.
This is merely one example of what is happening across industries at varying degrees of magnitude and rapidity, leaving entire supply chains supporting renewable buildouts and related electrical grid infrastructure at risk. This, combined with a massive rerating in its valuation, drove our decision to exit Quanta Services, Inc. (NYSE:PWR) during the quarter despite it being one of the biggest beneficiaries of the accelerating demand for renewables and electrical grid upgrades.”
A pipeline snaking through a desert canyon, representing a energy’s transport infrastructure.
Quanta Services, Inc. (NYSE:PWR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 54 hedge fund portfolios held Quanta Services, Inc. (NYSE:PWR) at the end of third quarter which was 41 in the previous quarter.
We discussed Quanta Services, Inc. (NYSE:PWR) in another article and shared Artisan Mid Cap Fund’s views on the company. In addition, please check out our hedge fund investor letters Q3 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
