Were These Hedge Funds Right About Crowding Into Sempra Energy (SRE)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Sempra Energy (NYSE:SRE).

Sempra Energy (NYSE:SRE) investors should pay attention to an increase in support from the world’s most elite money managers lately. Sempra Energy (NYSE:SRE) was in 35 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 27 hedge funds in our database with SRE holdings at the end of March. Our calculations also showed that SRE 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.

According to most investors, hedge funds are assumed to be slow, outdated investment tools of years past. While there are greater than 8000 funds trading at the moment, Our researchers choose to focus on the leaders of this group, around 850 funds. These hedge fund managers orchestrate the majority of the smart money’s total capital, and by keeping track of their matchless stock picks, Insider Monkey has deciphered many investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

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 biggest telecom companies to identify fast growing companies in various industries. 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 new hedge fund action encompassing Sempra Energy (NYSE:SRE).

Hedge fund activity in Sempra Energy (NYSE:SRE)

At second quarter’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the first quarter of 2020. By comparison, 25 hedge funds held shares or bullish call options in SRE a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SRE A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the biggest position in Sempra Energy (NYSE:SRE). D E Shaw has a $91.8 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is  Renaissance Technologies, with a $90.6 million position; 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism comprise Phill Gross and Robert Atchinson’s Adage Capital Management, D. E. Shaw’s D E Shaw and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Highbridge Capital Management allocated the biggest weight to Sempra Energy (NYSE:SRE), around 2.97% of its 13F portfolio. Ecofin Ltd is also relatively very bullish on the stock, earmarking 1.34 percent of its 13F equity portfolio to SRE.

As industrywide interest jumped, some big names were breaking ground themselves. Weiss Asset Management, managed by Andrew Weiss, established the largest position in Sempra Energy (NYSE:SRE). Weiss Asset Management had $12.2 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $6 million investment in the stock during the quarter. The other funds with new positions in the stock are  Highbridge Capital Management, Jinghua Yan’s TwinBeech Capital, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sempra Energy (NYSE:SRE) but similarly valued. These stocks are Snap Inc. (NYSE:SNAP), The Bank of New York Mellon Corporation (NYSE:BK), Bank of Montreal (NYSE:BMO), Constellation Brands, Inc. (NYSE:STZ), Thomson Reuters Corporation (NYSE:TRI), Banco Bradesco SA (NYSE:BBD), and Public Storage (NYSE:PSA). This group of stocks’ market caps resemble SRE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SNAP 49 1601957 1
BK 48 4431288 -4
BMO 13 107019 0
STZ 53 1653433 3
TRI 25 440519 3
BBD 18 235952 3
PSA 26 712541 -1
Average 33.1 1311816 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.1 hedge funds with bullish positions and the average amount invested in these stocks was $1312 million. That figure was $635 million in SRE’s case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand Bank of Montreal (NYSE:BMO) is the least popular one with only 13 bullish hedge fund positions. Sempra Energy (NYSE:SRE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SRE is 67.5. 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. Hedge funds were also right about betting on SRE, though not to the same extent, as the stock returned 7.9% since Q2 (through October 30th) and outperformed the market as well.

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