Was The Smart Money Right About Duke Energy Corporation (DUK)?

Is Duke Energy Corporation (NYSE:DUK) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Duke Energy Corporation (NYSE:DUK) investors should be aware of a decrease in enthusiasm from smart money of late. Duke Energy Corporation (NYSE:DUK) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistics is 37. There were 35 hedge funds in our database with DUK positions at the end of the first quarter. Our calculations also showed that DUK isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now let’s take a look at the latest hedge fund action regarding Duke Energy Corporation (NYSE:DUK).

What have hedge funds been doing with Duke Energy Corporation (NYSE:DUK)?

At second quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DUK over the last 20 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in Duke Energy Corporation (NYSE:DUK) was held by Renaissance Technologies, which reported holding $222.3 million worth of stock at the end of June. It was followed by Two Sigma Advisors with a $140.4 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and AQR Capital Management. In terms of the portfolio weights assigned to each position Claar Advisors allocated the biggest weight to Duke Energy Corporation (NYSE:DUK), around 4.73% of its 13F portfolio. Stevens Capital Management is also relatively very bullish on the stock, dishing out 3.1 percent of its 13F equity portfolio to DUK.

Because Duke Energy Corporation (NYSE:DUK) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few funds who sold off their full holdings heading into Q3. Intriguingly, Jos Shaver’s Electron Capital Partners dropped the largest position of all the hedgies monitored by Insider Monkey, worth about $59.1 million in stock, and Clint Carlson’s Carlson Capital was right behind this move, as the fund said goodbye to about $14.1 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q3.

Let’s now review hedge fund activity in other stocks similar to Duke Energy Corporation (NYSE:DUK). These stocks are Activision Blizzard, Inc. (NASDAQ:ATVI), CME Group Inc (NASDAQ:CME), Micron Technology, Inc. (NASDAQ:MU), Chubb Limited (NYSE:CB), Ecolab Inc. (NYSE:ECL), Takeda Pharmaceutical Company Limited (NYSE:TAK), and U.S. Bancorp (NYSE:USB). All of these stocks’ market caps resemble DUK’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 56.1 hedge funds with bullish positions and the average amount invested in these stocks was $2952 million. That figure was $907 million in DUK’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand Takeda Pharmaceutical Company Limited (NYSE:TAK) is the least popular one with only 18 bullish hedge fund positions. Duke Energy Corporation (NYSE:DUK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DUK is 39.3. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. A small number of hedge funds were also right about betting on DUK as the stock returned 16.6% since the end of the second quarter (through 10/30) and outperformed the market by an even larger margin.

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