In this article, we’ll explore the top 10 stock picks of William Harnisch’s Peconic Partners.
Established in 1997, Peconic Partners is a hedge fund manager based in New York, under the leadership of William Harnisch. The firm manages both its capital and that of its clients, using long/short equity hedge fund strategies. It also follows a thematic investment approach with a structured and consistent methodology, aiming to achieve positive returns over the long term regardless of market conditions.
Peconic Partners’s stock selection approach is driven by its deep experience. The Peconic Partners investment strategy has a history spanning over 40 years, originating with its predecessor firm. Peconic Partners’ long-term track record, history of capital appreciation, and past ability to generate alpha are testaments to the vision, insight, and patience derived from their experience.
William Harnisch of Peconic Partners LLC
William Harnisch is the Chief Investment Strategist at Peconic Partners. He managed Peconic Partners from the late 1970s until 1997 when the long-only business was sold to a privately-held financial services firm aiming to expand its asset management business. However, William Harnisch and his partners retained exclusive ownership of the hedge business. In December 2004, he and the current Peconic team formed Peconic Partners, continuing the successful and disciplined hedge fund strategy practiced since the late 1970s.
Mr. Harnisch’s career began in 1968 at Chase Manhattan Bank. He later joined Forstmann-Leff Associates (FLA), managing assets exceeding $5 billion and entering the hedge fund business in 1986. In 1997, he sold FLA’s long-only business and in 2004, he founded Peconic Partners to concentrate on hedged products. William Harnisch holds a B.B.A. from Baruch College and is a Chartered Financial Analyst. He is active in philanthropy through the William F. Harnisch Foundation and is a board member of the Baruch College Fund. His market insights have been featured in the Wall Street Journal and Barron’s.
In 2023, Peconic Partners LLC regained the top spot on HedgeFollow’s Top 20 Best Performing Hedge Funds list. Despite challenges like rising inflation and market volatility, Peconic Partners delivered a remarkable 191.50% performance over three years. This achievement is significant as many money managers struggled during a surprising market rally. While only 38% of large-cap mutual funds beat the market in 2023, and long-short hedge funds saw minimal gains, Peconic Partners excelled. For the fourth year in a row, the New York-based fund achieved an annual gain of 38%, three times higher than the S&P 500’s performance.
In late December of 2023, Mr. Harnisch increased bets against the SPDR S&P 500 ETF Trust and took short positions in expensive industrial stocks and consumer-product makers that have raised prices aggressively. This caused the fund’s net leverage to decrease from 50% to 33% in a few weeks, and it has continued to drop in early 2024.
Our Methodology
The companies mentioned in this article come from Peconic Hedge Fund’s top 10 stock picks at the end of the first quarter of 2024. To give readers a thorough understanding of these companies, we’ve included analyst ratings and other relevant details. We also mention the number of hedge fund investors in each company. Why focus on the stocks that hedge funds invest in? Our research shows that mimicking the top picks of the best hedge funds can lead to market-beating returns. Our quarterly newsletter’s strategy, which selects 14 small-cap and large-cap stocks each quarter, has returned 275% since May 2014, outperforming its benchmark by 150 percentage points. (see more details here)
10. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 302
Amazon.com, Inc. (NASDAQ:AMZN) is a leading global e-commerce platform and major player in cloud computing through Amazon Web Services (AWS), benefiting from the increasing use of cloud services by businesses. Amazon.com, Inc. (NASDAQ:AMZN) is also expanding its offerings in AI, logistics, and digital streaming, which supports its growth and market opportunities. With accelerating growth in AI cloud and advertising, management anticipates a significant increase in capital expenditure for FY2024, primarily to expand AWS infrastructure.
Amazon.com, Inc. (NASDAQ:AMZN) has demonstrated strong financial performance, with revenue rising to $514 billion in 2023 from $469 billion in 2022, and profit margins improving. Analysts note that Amazon.com, Inc. (NASDAQ:AMZN)’s EV/Sales ratio is in line with its 5-year average, and its non-GAAP P/E ratio for FY2024 is consistent with the Nasdaq 100 index. While Amazon.com, Inc. (NASDAQ:AMZN) focuses on high-growth areas like AI, cloud computing, and advertising, retail sales still account for 82.5% of its revenue. As of the end of Q1 2024, Peconic Partners had a $718K position in Amazon.com, Inc. (NASDAQ:AMZN).
Alphyn Capital Management stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“In his annual letter to shareholders, CEO Andy Jassy underscores Amazon.com, Inc.’s (NASDAQ:AMZN) commitment to “primitive services” over the last 20 years – creating foundational building blocks that empower rapid development of higher level products and services. Examples include developing core functionalities like payments and search, which eventually led to the Fulfilled by Amazon service, or developing logistics infrastructure, which led to the Buy with Prime service. Amazon is adopting the same approach to the next front, GenAI, from custom AI chips and training/deployment services to empower companies to construct their own core GenAI models, to their Bedrock service which allows customers to use pre-existing models to more quickly develop applications, to Amazon developing their own applications for internal use (think Alexa and a new shopping AI called Rufus).
Amazon’s dominance comes not just from its scale but also from a relentless “customer obsession,” exemplified by its focus on building services that empower customers. This positions Amazon to capture significant shares of the growing retail and cloud markets. With a 45% share of online retail, which only makes up 25% of total retail sales, Amazon is well-placed for growth. The company’s expansion into the grocery sector, backed by investments in same-day delivery, shows promise. Currently, Amazon holds a 20% share of the grocery market, a segment that constitutes 34% of US retail sales but is only 12% penetrated. As online retail trends towards 40-50% penetration, Amazon’s growth potential is meaninful. Similarly, in the cloud sector, only 10% of IT spending has shifted to the cloud, with AWS holding a 35% market share.”
9. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 130
Uber Technologies, Inc. (NYSE:UBER) made it to Peconic Hedge Fund’s top 10 stock picks. Uber Technologies, Inc. (NYSE:UBER) is a major force in ride-sharing and has a strong presence worldwide. In addition to ride-sharing, Uber Technologies, Inc. (NYSE:UBER) makes money from other services like Uber Eats (food delivery) and freight. Both Uber Eats and Uber Freight are growing quickly due to rising demand for delivery and logistics.
According to regulatory filings, at the end of the first quarter of 2024, Peconic Partners held 10,330 shares of Uber Technologies, Inc. (NYSE:UBER), valued at $795,307 and accounting for 0.03% of their portfolio. Analyst Johannes Kirchmayr expects a return of over 10% over a 5-year holding period for investors who keep holding Uber Technologies, Inc. (NYSE:UBER) at the current market price, assuming the EV/Sales ratio remains constant. Due to the current downward trend of Uber Technologies, Inc. (NYSE:UBER), the analyst recommends waiting for a trend reversal before buying. Uber Technologies, Inc. (NYSE:UBER)’s valuation is slightly higher than industry peers, with a median EV/Sales TTM multiple of 3.2x compared to Uber’s 3.6x.
RiverPark Large Growth Fund stated the following regarding Uber Technologies, Inc. (NYSE:UBER) in its first quarter 2024 investor letter:
“Uber Technologies, Inc. (NYSE:UBER): UBER was a top contributor in the quarter following better than expected 4Q23 earnings and 1Q24 guidance. Gross bookings of $37.6 billion were up 22% year over year. Mobility gross bookings of $19.3 billion grew 29% over last year driven by a combination of product innovation and driver availability. Delivery gross bookings of $17 billion were up 19% from last year and continued to be strong throughout the quarter. 4Q Adjusted EBITDA of $1.3 billion, up $618 million year over year, was better than management’s guidance of $1.2 billion, and the company generated $768 million of free cash flow, up from a cash loss of $303 million last year. Management guided to continuing growth in 1Q Gross Bookings (20% growth) and Adjusted EBITDA (of $1.3 billion). The company hosted a well-received analyst day in February during which it guided to three year compounded annual growth rates for gross bookings of mid-to-high single digits and EBITDA of 30-40%, both above investor expectations. The company also guided to free cash flow conversion of 90% of EBITDA.
UBER remains the undisputed global leader in ride sharing, with a greater than 50% share in every major region in which it operates. The company is also a leader in food delivery, where it is number one or two in the more than 25 countries in which it operates. Moreover, after a history of losses, the company is now profitable, delivering expanding margins and substantial free cash flow. We view UBER as more than a ride sharing and food delivery service; we also see it as a global mobility platform with 142 million users (by comparison, Amazon Prime has 200 million members) and the ability to penetrate new markets of on-demand services, such as package and grocery delivery, travel, and hourly worker staffing. Given its $5.4 billion of unrestricted cash and $4.8 billion of investments, the company today has an enterprise value of $165 billion, indicating that UBER trades at 21x our estimates of next year’s free cash flow.”
8. FirstEnergy Corp. (NYSE:FE)
Number of Hedge Fund Holders: 24
Regulatory filings indicate that at the end of the first quarter of 2024, Peconic Partners held 100,000 shares of FirstEnergy Corp. (NYSE:FE), valued at $3,862,000 and accounting for 0.17% of their portfolio. FirstEnergy Corp. (NYSE:FE) was more impacted by pandemic-related lockdowns than some of its peers, but it still maintains the stability that is generally valued.
FirstEnergy Corp. (NYSE:FE) shares have been on an upward trajectory in recent days as investor interest towards electricity stocks is building due to expected increase in AI power demand as well as electrification of the automotive industry.
The FPA Crescent Fund stated the following regarding FirstEnergy Corp. (NYSE:FE) in its fourth quarter 2023 investor letter:
“FirstEnergy Corp. (NYSE:FE) is an Ohio-based public utility holding company that we purchased in 2020 in the face of a bribery scandal. The company paid fines, and senior management changed as a result; since then, the company has performed well operationally, which has translated into good stock performance. While increasing interest rates in 2023 caused its stock to drop from its highs (along with the Interest Rate Caps), it continues to trade at a substantial discount to its peers and offers a 4.5% dividend yield.”
7. The Southern Company (NYSE:SO)
Number of Hedge Fund Holders: 29
The Southern Company (NYSE:SO) ranks 7th in Peconic Hedge Fund’s top 10 stock picks. Regulatory filings show that at the end of the first quarter of 2024, Peconic Partners held 76,819 shares of The Southern Company (NYSE:SO), valued at $5,510,995, which made up 0.24% of their portfolio. The Southern Company (NYSE:SO) is the largest electricity producer in the US. It serves 9 million customers across 7 states and offers a diverse mix of power generation assets, including nuclear, wind, and solar. The Southern Company (NYSE:SO) aims for zero carbon emissions by 2050, having recently completed nuclear power plants and planning to retire coal plants by 2028.
According to Dane Bowler, an analyst at 2nd Market Capital Advisory Corp., The Southern Company (NYSE:SO)’s conservative load estimates, strong reputation, and high allowed ROEs suggest it could grow beyond the projected 5%-7%. This makes it a well-priced investment with expected total returns in the low double digits.
6. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 72
NextEra Energy (NYSE:NEE) experienced a turbulent year, with shares dropping to a 52-week low of $47.15 in October 2023 before rebounding to over $75 by July 12, 2024. NextEra Energy (NYSE:NEE) surged after the pandemic, reaching all-time highs by the end of 2021. At one point, NextEra Energy (NYSE:NEE)’s market cap exceeded that of Exxon Mobil Corporation (NYSE:XOM). NextEra Energy (NYSE:NEE) operates 74 gigawatts of energy, with projections to surpass 100 gigawatts in the next three years. Senior leadership at NextEra Energy (NYSE:NEE) maintains that forward EPS projections remain unchanged, with expected annualized EPS growth of 6-8% through 2026.
Analyst Steven Fiorillo believes NextEra Energy, Inc. (NYSE:NEE) will benefit significantly from the growing AI boom. He expects strong capital appreciation and dividend growth as energy demand rises. Regulatory filings reveal that at the end of the first quarter of 2024, Peconic Partners owned 250,000 shares of NextEra Energy, Inc. (NYSE:NEE), valued at $15,977,500. This represented 0.7% of their portfolio. NextEra Energy, Inc. (NYSE:NEE) ranks 6th in Peconic Hedge Fund’s top 10 stock picks.
ClearBridge Large Cap Growth Strategy stated the following regarding NextEra Energy, Inc. (NYSE:NEE) in its Q2 2024 investor letter:
“AI-related momentum was a key driver of performance in the second quarter, lifting the enablers in technology as well as holdings like renewable power producer NextEra Energy, Inc. (NYSE:NEE) that supply the increasing energy needs of data centers. Parts of the market lacking an AI connection, like our medical device holdings, underperformed despite no change to fundamentals. We have managed through several similar momentum periods over our tenure and have delivered long-term results for shareholders by staying true to an approach that emphasizes diversification across three buckets of growth companies (select, stable and cyclical) and seeks to take advantage of attractive entry points into quality growth businesses.”
5. Carnival Corporation & plc (NYSE:CCL)
Number of Hedge Fund Holders: 56
Carnival Corporation & plc (NYSE:CCL) landed in the 5th spot of Peconic Hedge Fund’s top 10 stock picks. Carnival Corporation & plc (NYSE:CCL) is an international cruise line with a diverse portfolio that includes cruise lines, ports, private islands, and hotels. Carnival Corporation & plc (NYSE:CCL) has struggled to recover from its 2020 lows and continues to have difficulty providing value for investors. Over the past decade, Carnival Corporation & plc (NYSE:CCL) has dropped 51.49% and has also underperformed compared to peers like Royal Caribbean Cruises Ltd. (NYSE:RCL), Expedia Group, Inc. (NASDAQ:EXPE) and Hyatt Hotels Corporation (NYSE:H).
Carnival Corporation & plc (NYSE:CCL)’s revenues grew rapidly in 2023, surpassing guidance, achieving positive adjusted net income for the year, and reducing debt. In Q1 2024, revenue grew by 22% year-on-year despite a challenging comparison to Q1 2023, which had seen a significant revenue spike as cruise travel normalized post-pandemic.
According to Green Growth Giants Analyst, Manika Premsingh, this positive trend is expected to continue into Q2 2024, although revenue growth may soften due to base effects and company projections. Carnival Corporation & plc (NYSE:CCL) recently upgraded its full-year outlook, expecting net yields to rise by 9.5%, up from an earlier forecast of 8.5%.
4. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 115
Micron Technology, Inc. (NASDAQ:MU) ranks 4th in Peconic Hedge Fund’s top 10 stock picks. According to regulatory filings for the first quarter of 2024, Peconic Partners owned 775,000 shares of Micron Technology, Inc. (NASDAQ:MU), worth $91,364,750, representing 4.05% of their portfolio. Micron Technology, Inc. (NASDAQ:MU) is enjoying increased profitability thanks to strong demand for its memory and storage products. Micron Technology, Inc. (NASDAQ:MU) exceeded profit expectations for Q3 2024, with sales surging, and plans to boost capital expenditures to meet this demand.
Financial researcher On the Pulse stated that Micron Technology, Inc. (NASDAQ:MU)’s stock is undervalued, trading at less than 13.9 times its earnings, and has the potential for substantial sales growth in 2025.
ClearBridge Value Equity Strategy stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q2 2024 investor letter:
“Stock selection in the IT sector proved to be the largest contributor to performance, particularly driven by the strong performance of Micron Technology, Inc. (NASDAQ:MU) The company, which designs, develops, manufactures and sells memory and storage products, continued its strong performance alongside other AI beneficiaries as the anticipated demand for new and additional storage essential for housing and training large language AI models continues to grow.”
3. The Utilities Select Sector SPDR Fund (NYSE:XLU)
Number of Hedge Fund Holders: 21
Ranking 3rd in Peconic Hedge Fund’s top 10 stock picks is The Utilities Select Sector SPDR Fund (NYSE:XLU). The Utilities Select Sector SPDR Fund (NYSE:XLU) provides a dividend yield of about 3.5%, which is attractive to investors seeking regular income, especially in a low-interest-rate environment. Companies in The Utilities Select Sector SPDR Fund (NYSE:XLU) operate in regulated industries, ensuring stable revenue and reducing the impact of market volatility. Additionally, substantial investments in infrastructure and renewable energy support long-term growth, benefiting The Utilities Select Sector SPDR Fund (NYSE:XLU) investors.
The outlook for utility stocks is improving primarily because inflation appears to be decreasing, which suggests that interest rates will also decline. Recent reports show inflation cooling, with June’s CPI down 0.1% from the previous month and closer to the Fed’s 2% target. Core inflation also remains stable. This trend suggests a possible rate cut by the Fed, anticipated around September, with an 80% likelihood of a 25 basis point reduction, according to Samuel Smith, an analyst at High Yield Investor.
Regulatory filings for the first quarter of 2024 show that Peconic Partners owned 1,611,484 shares of the Utilities Select Sector SPDR Fund (NYSE:XLU), worth $105,793,925, representing 4.69% of their portfolio.
2. Dycom Industries, Inc. (NYSE:DY)
Number of Hedge Fund Holders: 26
Ranking 2nd in Peconic Hedge Fund’s top 10 stock picks is Dycom Industries, Inc. (NYSE:DY). Dycom Industries, Inc. (NYSE:DY) works in the telecommunications infrastructure sector, which is seeing high demand because of investments in 5G networks and broadband expansion. The continued rollout of 5G and increased broadband investments are expected to drive further growth for the company.
Dycom Industries, Inc. (NYSE:DY) has demonstrated strong financial performance with steady revenue and earnings growth. For example, its revenue rose to $3.4 billion in the latest fiscal year, up from $3.2 billion the previous year. Although its profit margins are slightly below the industry average, Dycom Industries, Inc. (NYSE:DY) expects to improve them in fiscal year 2025. Analyst Robert F. Abbott rates Dycom Industries, Inc. (NYSE:DY) as a Buy, citing its track record of earnings and share price growth. He also notes an expected earnings growth of 17.95% for fiscal 2026 and 19.85% for fiscal 2027.
According to regulatory filings as of the first quarter of 2024, Peconic Partners owned 3,596,582 shares of Dycom Industries, Inc. (NYSE:DY), valued at $516,217,414, accounting for 22.92% of their portfolio.
1. Quanta Services, Inc. (NYSE:PWR)
Number of Hedge Fund Holders: 56
Topping Peconic Hedge Fund’s top 10 stock picks is Quanta Services, Inc. (NYSE:PWR). Quanta Services, Inc. (NYSE:PWR) works in the energy and telecommunications sectors, which are seeing high demand due to investments in renewable energy, infrastructure upgrades, and expanding networks. Quanta Services Inc. (NYSE: PWR) has recently acquired Cupertino Electric for around $1.54 billion. This includes $1.3 billion in cash and 883,000 Quanta shares worth about $225 million, with an additional potential payment of up to $200 million based on performance targets. The acquisition is expected to immediately enhance Quanta Services, Inc. (NYSE:PWR)’s growth, cash flow, and earnings per share, contributing an estimated $175-$195 million to adjusted core profit and $0.40-$0.50 to adjusted diluted EPS for FY25.
Regulatory filings reveal that by the end of the first quarter of 2024, Peconic Partners owned 5,598,565 shares of Quanta Services, Inc. (NYSE:PWR), valued at $1,454,507,187, making up a significant portion of their portfolio at 64.58%. Guiding Mast Investments’ analyst, George Fisher, recommends buying Quanta Services, Inc. (NYSE:PWR) with a caveat. He notes that Quanta Services, Inc. (NYSE:PWR) has a high valuation, and its earnings per share (EPS) growth must sustain a 17% rate over the next few years.
Artisan Mid Cap Fund stated the following regarding Quanta Services, Inc. (NYSE:PWR) in its fourth quarter 2023 investor letter:
“Along with DexCom, Inc. (NASDAQ:DXCM), notable adds in the quarter included Quanta Services, Inc. (NYSE:PWR) and Jabil Inc. (NYSE:JBL). Quanta provides outsourced skilled labor for maintenance and construction services, primarily to utilities. We have followed the company for over a decade and have witnessed its shift from oil and gas to renewables. The energy transition (solar and wind farms, electric vehicles, etc.) requires investments in the US energy grid to support greater electrification. At the same time, climate change is increasing stress on the existing grid, forcing utilities to increase maintenance spending. Furthermore, Federal incentive programs, such as the Inflation Reduction Act and Bipartisan Infrastructure Act, will help fuel Quanta’s long-term growth given its expertise in transmission and distribution connections as renewable energy infrastructure seeks to connect to the grid. The stock sold off early in the quarter on concerns that higher interest rates would lead to a pullback in renewables investments by utility customers. However, based on our industry research, we think Quanta’s key customers are well resourced and committed to meeting long-term electrification needs via infrastructure investment. We used the selloff as an opportunity to move the position into the CropSM at a more attractive valuation.”
While we recognize Quanta Services, Inc. (NYSE:PWR)’s growth potential, and being the top choice of Peconic Hedge Fund, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
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