Were Hedge Funds Right About Duke Energy Corporation (DUK)?

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Duke Energy Corporation (NYSE:DUK).

Duke Energy Corporation (NYSE:DUK) shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. Duke Energy Corporation (NYSE:DUK) was in 36 hedge funds’ portfolios at the end of June. The all time high for this statistic is 38. Our calculations also showed that DUK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). 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. For example, lithium prices have more than doubled over the past year, 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. Now let’s analyze the fresh hedge fund action surrounding Duke Energy Corporation (NYSE:DUK).

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

Heading into the third quarter of 2021, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in DUK over the last 24 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

More specifically, D E Shaw was the largest shareholder of Duke Energy Corporation (NYSE:DUK), with a stake worth $121.6 million reported as of the end of June. Trailing D E Shaw was Elliott Investment Management, which amassed a stake valued at $98.7 million. AQR Capital Management, Renaissance Technologies, and Adage Capital 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 Yaupon Capital allocated the biggest weight to Duke Energy Corporation (NYSE:DUK), around 2.98% of its 13F portfolio. Claar Advisors is also relatively very bullish on the stock, setting aside 2.93 percent of its 13F equity portfolio to DUK.

As industrywide interest jumped, key money managers have been driving this bullishness. Elliott Investment Management, managed by Paul Singer, assembled the most valuable position in Duke Energy Corporation (NYSE:DUK). Elliott Investment Management had $98.7 million invested in the company at the end of the quarter. Sander Gerber’s Hudson Bay Capital Management also made a $11.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Pattyn’s Yaupon Capital, David Harding’s Winton Capital Management, and Renee Yao’s Neo Ivy Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Duke Energy Corporation (NYSE:DUK) but similarly valued. We will take a look at Canadian National Railway Company (NYSE:CNI), Truist Financial Corporation (NYSE:TFC), Activision Blizzard, Inc. (NASDAQ:ATVI), CSX Corporation (NASDAQ:CSX), The Sherwin-Williams Company (NYSE:SHW), Coupang, Inc. (NYSE:CPNG), and Equinix, Inc. (REIT) (NASDAQ:EQIX). This group of stocks’ market values resemble DUK’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.9 hedge funds with bullish positions and the average amount invested in these stocks was $5078 million. That figure was $566 million in DUK’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand Coupang, Inc. (NYSE:CPNG) is the least popular one with only 33 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 38.8. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately DUK wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); DUK investors were disappointed as the stock returned 4% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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