While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, declining oil prices and the trade war with China, many smart money investors kept their optimism regarding the current bull run in the fourth quarter, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding FirstEnergy Corp. (NYSE:FE).
FirstEnergy Corp. (NYSE:FE) has seen an increase in enthusiasm from smart money in recent months. FE was in 39 hedge funds’ portfolios at the end of the fourth quarter of 2018 which is an all time high. There were 38 hedge funds in our database with FE positions at the end of the previous quarter. Our calculations also showed that FE isn’t among the 30 most popular stocks among hedge funds.
If you’d ask most stock holders, hedge funds are assumed to be slow, outdated financial vehicles of the past. While there are more than 8000 funds with their doors open today, We look at the top tier of this club, around 750 funds. These investment experts preside over the majority of all hedge funds’ total asset base, and by tracking their first-class equity investments, Insider Monkey has revealed a number of investment strategies that have historically outperformed the market. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let’s analyze the recent hedge fund action surrounding FirstEnergy Corp. (NYSE:FE).
What does the smart money think about FirstEnergy Corp. (NYSE:FE)?
Heading into the first quarter of 2019, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in FE a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Zimmer Partners was the largest shareholder of FirstEnergy Corp. (NYSE:FE), with a stake worth $1106.9 million reported as of the end of September. Trailing Zimmer Partners was Elliott Management, which amassed a stake valued at $940.4 million. Renaissance Technologies, Millennium Management, and Fir Tree were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key money managers were breaking ground themselves. D E Shaw, managed by D. E. Shaw, established the most outsized position in FirstEnergy Corp. (NYSE:FE). D E Shaw had $25 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $20.8 million position during the quarter. The other funds with new positions in the stock are Anna Nikolayevsky’s Axel Capital Management, Joseph Samuels’s Islet Management, and Brandon Haley’s Holocene Advisors.
Let’s go over hedge fund activity in other stocks similar to FirstEnergy Corp. (NYSE:FE). These stocks are Korea Electric Power Corporation (NYSE:KEP), IHS Markit Ltd. (NASDAQ:INFO), Motorola Solutions Inc (NYSE:MSI), and Realty Income Corporation (NYSE:O). This group of stocks’ market valuations are closest to FE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KEP | 9 | 44600 | 5 |
| INFO | 27 | 1041562 | -4 |
| MSI | 23 | 589401 | -3 |
| O | 18 | 305732 | 2 |
| Average | 19.25 | 495324 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $495 million. That figure was $3732 million in FE’s case. IHS Markit Ltd. (NASDAQ:INFO) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (NYSE:KEP) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks FirstEnergy Corp. (NYSE:FE) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately FE wasn’t in this group. Hedge funds that bet on FE were disappointed as the stock returned 10.9% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
