Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Dominion Energy Inc. (NYSE:D).
Dominion Energy Inc. (NYSE:D) was in 39 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 47. D has seen a decrease in hedge fund sentiment recently. There were 47 hedge funds in our database with D positions at the end of the fourth quarter. Our calculations also showed that D isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Stuart Zimmer of Zimmer Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a glance at the key hedge fund action regarding Dominion Energy Inc. (NYSE:D).
Do Hedge Funds Think D Is A Good Stock To Buy Now?
At Q1’s end, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in D over the last 23 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Matthew Stadelman’s Diamond Hill Capital has the biggest position in Dominion Energy Inc. (NYSE:D), worth close to $259.3 million, comprising 1% of its total 13F portfolio. Coming in second is D. E. Shaw of D E Shaw, with a $209.9 million position; 0.2% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish encompass Ken Griffin’s Citadel Investment Group, Phill Gross and Robert Atchinson’s Adage Capital Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Covalis Capital allocated the biggest weight to Dominion Energy Inc. (NYSE:D), around 2.57% of its 13F portfolio. Beech Hill Partners is also relatively very bullish on the stock, earmarking 1.64 percent of its 13F equity portfolio to D.
Because Dominion Energy Inc. (NYSE:D) has experienced a decline in interest from hedge fund managers, we can see that there lies a certain “tier” of hedgies that slashed their full holdings heading into Q2. It’s worth mentioning that Daniel S. Och’s OZ Management dumped the biggest investment of all the hedgies watched by Insider Monkey, comprising an estimated $18.2 million in stock. Matthew Davis’s fund, Coann Capital, also said goodbye to its stock, about $10 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 8 funds heading into Q2.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Dominion Energy Inc. (NYSE:D) but similarly valued. We will take a look at Autodesk, Inc. (NASDAQ:ADSK), NIO Inc. (NYSE:NIO), Equinix Inc (NASDAQ:EQIX), Workday Inc (NYSE:WDAY), Global Payments Inc (NYSE:GPN), Banco Santander, S.A. (NYSE:SAN), and Capital One Financial Corp. (NYSE:COF). This group of stocks’ market values resemble D’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADSK | 66 | 3056525 | 0 |
| NIO | 28 | 1321170 | -6 |
| EQIX | 41 | 1546339 | -1 |
| WDAY | 69 | 5179677 | -11 |
| GPN | 62 | 4558094 | 7 |
| SAN | 15 | 490548 | 1 |
| COF | 59 | 3139814 | 3 |
| Average | 48.6 | 2756024 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 48.6 hedge funds with bullish positions and the average amount invested in these stocks was $2756 million. That figure was $1296 million in D’s case. Workday Inc (NYSE:WDAY) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 15 bullish hedge fund positions. Dominion Energy Inc. (NYSE:D) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for D is 44.1. 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 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately D wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); D investors were disappointed as the stock returned -0.3% since the end of March (through 6/25) 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.
Follow Dominion Energy Inc (NYSE:D)
Follow Dominion Energy Inc (NYSE:D)
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Disclosure: None. This article was originally published at Insider Monkey.
