We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind let’s see whether DTE Energy Company (NYSE:DTE) represents a good buying opportunity at the moment. Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Is DTE Energy Company (NYSE:DTE) ready to rally soon? Money managers are becoming hopeful. The number of bullish hedge fund positions inched up by 12 lately. Our calculations also showed that DTE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to view the new hedge fund action surrounding DTE Energy Company (NYSE:DTE).
What does smart money think about DTE Energy Company (NYSE:DTE)?
Heading into the first quarter of 2020, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 52% from the third quarter of 2019. On the other hand, there were a total of 23 hedge funds with a bullish position in DTE a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the number one position in DTE Energy Company (NYSE:DTE). Citadel Investment Group has a $238.4 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $189.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers with similar optimism comprise Stuart J. Zimmer’s Zimmer Partners, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Blackstart Capital allocated the biggest weight to DTE Energy Company (NYSE:DTE), around 6.55% of its 13F portfolio. Yaupon Capital is also relatively very bullish on the stock, earmarking 4.47 percent of its 13F equity portfolio to DTE.
Consequently, some big names were leading the bulls’ herd. Luminus Management, managed by Jonathan Barrett and Paul Segal, created the largest position in DTE Energy Company (NYSE:DTE). Luminus Management had $39.3 million invested in the company at the end of the quarter. Highbridge Capital Management also made a $37.3 million investment in the stock during the quarter. The following funds were also among the new DTE investors: Phill Gross and Robert Atchinson’s Adage Capital Management, D. E. Shaw’s D E Shaw, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as DTE Energy Company (NYSE:DTE) but similarly valued. These stocks are McKesson Corporation (NYSE:MCK), Twitter Inc (NYSE:TWTR), KKR & Co Inc. (NYSE:KKR), and Xilinx, Inc. (NASDAQ:XLNX). This group of stocks’ market valuations match DTE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MCK | 51 | 2268968 | 6 |
| TWTR | 55 | 1427081 | 0 |
| KKR | 56 | 3623655 | 13 |
| XLNX | 42 | 1025915 | -1 |
| Average | 51 | 2086405 | 4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 51 hedge funds with bullish positions and the average amount invested in these stocks was $2086 million. That figure was $1090 million in DTE’s case. KKR & Co Inc. (NYSE:KKR) is the most popular stock in this table. On the other hand Xilinx, Inc. (NASDAQ:XLNX) is the least popular one with only 42 bullish hedge fund positions. Compared to these stocks DTE Energy Company (NYSE:DTE) is even less popular than XLNX. Hedge funds dodged a bullet by taking a bearish stance towards DTE. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately DTE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); DTE investors were disappointed as the stock returned -19.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
