In this article we will check out the progression of hedge fund sentiment towards Sempra Energy (NYSE:SRE) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Sempra Energy (NYSE:SRE) has seen a decrease in hedge fund sentiment recently. Sempra Energy (NYSE:SRE) was in 23 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that SRE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Stuart Zimmer of Zimmer Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to review the fresh hedge fund action encompassing Sempra Energy (NYSE:SRE).
Do Hedge Funds Think SRE Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SRE over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Sempra Energy (NYSE:SRE) was held by Point72 Asset Management, which reported holding $58.3 million worth of stock at the end of September. It was followed by Zimmer Partners with a $52.8 million position. Other investors bullish on the company included Renaissance Technologies, Adage Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Coann Capital allocated the biggest weight to Sempra Energy (NYSE:SRE), around 3.52% of its 13F portfolio. Socorro Asset Management is also relatively very bullish on the stock, dishing out 3.43 percent of its 13F equity portfolio to SRE.
Seeing as Sempra Energy (NYSE:SRE) has faced a decline in interest from the smart money, we can see that there is a sect of money managers that decided to sell off their positions entirely last quarter. At the top of the heap, D. E. Shaw’s D E Shaw dropped the largest investment of the “upper crust” of funds followed by Insider Monkey, totaling close to $10.7 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund sold off about $9 million worth. These moves are interesting, as total hedge fund interest fell by 5 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Sempra Energy (NYSE:SRE). We will take a look at Aptiv PLC (NYSE:APTV), Baxter International Inc. (NYSE:BAX), SYSCO Corporation (NYSE:SYY), STMicroelectronics N.V. (NYSE:STM), Cintas Corporation (NASDAQ:CTAS), Marathon Petroleum Corp (NYSE:MPC), and Alcon Inc. (NYSE:ALC). 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 |
|---|---|---|---|
| APTV | 44 | 1757047 | 4 |
| BAX | 42 | 3485785 | -4 |
| SYY | 29 | 2245599 | -11 |
| STM | 11 | 49115 | -2 |
| CTAS | 36 | 781970 | 15 |
| MPC | 43 | 2688865 | -5 |
| ALC | 20 | 1263277 | -2 |
| Average | 32.1 | 1753094 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $1753 million. That figure was $287 million in SRE’s case. Aptiv PLC (NYSE:APTV) is the most popular stock in this table. On the other hand STMicroelectronics N.V. (NYSE:STM) is the least popular one with only 11 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. Our overall hedge fund sentiment score for SRE is 37.9. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately SRE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SRE investors were disappointed as the stock returned -0.2% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
