Hedge Funds Are Clamoring for Consolidated Edison, Inc. (ED)

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Consolidated Edison, Inc. (NYSE:ED).

Is Consolidated Edison, Inc. (NYSE:ED) a buy right now? Hedge funds are taking a bullish view. The number of long hedge fund bets advanced by 9 recently. ED was in 23 hedge funds’ portfolios at the end of the third quarter of 2016. There were 14 hedge funds in our database with ED holdings at the end of the previous quarter. At the end of this article we will also compare ED to other stocks including Public Service Enterprise Group Inc. (NYSE:PEG), Zoetis Inc (NYSE:ZTS), and Luxottica Group SpA (ADR) (NYSE:LUX) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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What does the smart money think about Consolidated Edison, Inc. (NYSE:ED)?

At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 64% surge from one quarter earlier, as hedge fund ownership of the stock remains volatile, though trending up. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness’ AQR Capital Management has the most valuable position in Consolidated Edison, Inc. (NYSE:ED), worth close to $275.4 million. On AQR Capital Management’s heels is Jonathan Barrett and Paul Segal of Luminus Management, with a $91 million position; the fund has 2.3% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Phill Gross and Robert Atchinson’s Adage Capital Management, Israel Englander’s Millennium Management, and D E Shaw, founded by David E. Shaw.

Now, key hedge funds have been driving this bullishness. Adage Capital Management created the biggest position in Consolidated Edison, Inc. (NYSE:ED). Adage Capital Management had $33.4 million invested in the company at the end of the quarter. Millennium Management also made a $20 million investment in the stock during the quarter. The other funds with brand new ED positions are David Harding’s Winton Capital Management, Ken Griffin’s Citadel Investment Group, and Jim Simons’ Renaissance Technologies.

Let’s also examine hedge fund activity in other stocks similar to Consolidated Edison, Inc. (NYSE:ED). We will take a look at Public Service Enterprise Group Inc. (NYSE:PEG), Zoetis Inc (NYSE:ZTS), Luxottica Group SpA (ADR) (NYSE:LUX), and Charter Communications, Inc. (NASDAQ:CHTR). This group of stocks’ market valuations are closest to ED’s market valuation.

As you can see these stocks had an average of 44.75 hedge funds with bullish positions and the average amount invested in these stocks was $5.34 billion. That figure was $513 million in ED’s case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand Luxottica Group SpA (ADR) (NYSE:LUX) is the least popular one with only 3 bullish hedge fund positions. Consolidated Edison, Inc. (NYSE:ED) 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 CHTR might be a better candidate to consider a long position in.

Disclosure: None