5 Recent Spin-off Companies That Hedge Funds Are Piling Into

2. Constellation Energy Corporation (NASDAQ:CEG)

Number of Hedge Fund Holders: 54

Constellation Energy Corporation (NASDAQ:CEG) generates and sells electricity in the United States. The company operates through five segments – Mid-Atlantic, Midwest, New York, ERCOT, and Other Power Regions. On February 1, Exelon Corporation (NASDAQ:EXC) completed the tax-free spinoff of Constellation Energy Corporation (NASDAQ:CEG). 

On January 17, RBC Capital analyst Shelby Tucker downgraded Constellation Energy Corporation (NASDAQ:CEG) to Sector Perform from Outperform with a price target of $91, up from $88. Although the investment story remains interesting, the analyst believes there may be a temporary slowdown as Constellation Energy Corporation (NASDAQ:CEG)’s management refines its growth strategy. The updated valuation model includes the possibility of clean hydrogen production, but the analyst does not anticipate a significant impact on cash flows until 2027.

According to Insider Monkey’s data, Constellation Energy Corporation (NASDAQ:CEG) was part of 54 hedge fund portfolios at the end of Q3 2022, compared to 43 in the prior quarter. John Smith Clark’s Southpoint Capital Advisors is the largest stakeholder of the company, with 3.50 million shares worth $291 million. 

Alger Capital made the following comment about Constellation Energy Corporation (NASDAQ:CEG) in its Q3 2022 investor letter:

“Constellation Energy Corporation (NASDAQ:CEG) is America’s leading clean energy company, based on carbon-free production. The company is the largest supplier of clean energy and sustainable solutions to homes, businesses, governments, community aggregations, and a range of wholesale customers (such as municipalities, cooperatives, and other end markets) across the continental U.S., backed by approximately 32,400 megawatts of generating capacity consisting of nuclear, wind, solar, natural gas and hydroelectric assets. Constellation produces nearly 10% of the nation’s carbon-free energy.

Shares outperformed during the third quarter primarily due to the Inflation Reduction Act (IRA). Signed into law in august, the bill provides a nuclear production tax credit of approximately $43.75 per megawatt hour of energy generated. This credit favorably impacted earnings, resulting in an increase in Constellation’s share price.”