What Do Hedge Funds Think of Sempra Energy (SRE)?

World-class money managers like Bill Ackman and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

Is Sempra Energy (NYSE:SRE) a buy here? Money managers are selling. The number of long hedge fund bets fell by 5 in recent months. At the end of this article we will also compare SRE to other stocks including PPG Industries, Inc. (NYSE:PPG), McGraw Hill Financial Inc (NYSE:MHFI), and Kellogg Company (NYSE:K) to get a better sense of its popularity.

Follow Sempra Energy (NYSE:SRE)

With all of this in mind, we’re going to take a gander at the latest action surrounding Sempra Energy (NYSE:SRE).

What have hedge funds been doing with Sempra Energy (NYSE:SRE)?

Heading into Q4, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the second quarter. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Jim Simons’s Renaissance Technologies has the number one position in Sempra Energy (NYSE:SRE), worth close to $168.2 million, comprising 0.4% of its total 13F portfolio. The second most bullish fund manager is Millennium Management, managed by Israel Englander, which holds an $148.4 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions consist of Jonathon Jacobson’s Highfields Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management and John Burbank’s Passport Capital.

Since Sempra Energy (NYSE:SRE) has witnessed a declination in interest from the smart money, logic holds that there was a specific group of funds that slashed their entire stakes last quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management dumped the largest stake of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $22.8 million in stock. Robert Vollero and Gentry T. Beach’s fund, Vollero Beach Capital Partners, also cut its stock, about $20 million worth. These moves are interesting, as total hedge fund interest fell by 5 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Sempra Energy (NYSE:SRE). We will take a look at PPG Industries, Inc. (NYSE:PPG), McGraw Hill Financial Inc (NYSE:MHFI), Kellogg Company (NYSE:K), and Chunghwa Telecom Co., Ltd (ADR) (NYSE:CHT). This group of stocks’ market values resemble SRE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PPG 51 1624847 5
MHFI 56 2584172 5
K 30 778773 8
CHT 9 81505 4

As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $1267 million. That figure was $969 million in SRE’s case. McGraw Hill Financial Inc (NYSE:MHFI) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (ADR) (NYSE:CHT) is the least popular one with only 9 bullish hedge fund positions. Sempra Energy (NYSE:SRE) 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 MHFI might be a better candidate to consider a long position.