How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Public Service Enterprise Group Incorporated (NYSE:PEG).
Public Service Enterprise Group Incorporated (NYSE:PEG) investors should pay attention to a decrease in support from the world’s most elite money managers recently. Our calculations also showed that PEG isn’t among the 30 most popular stocks among hedge funds.
In the eyes of most investors, hedge funds are perceived as slow, outdated financial tools of years past. While there are over 8000 funds with their doors open at the moment, We choose to focus on the leaders of this club, about 750 funds. These investment experts oversee most of all hedge funds’ total asset base, and by following their finest investments, Insider Monkey has formulated a number of investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
Let’s take a look at the fresh hedge fund action surrounding Public Service Enterprise Group Incorporated (NYSE:PEG).
How have hedgies been trading Public Service Enterprise Group Incorporated (NYSE:PEG)?
At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PEG over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Public Service Enterprise Group Incorporated (NYSE:PEG), with a stake worth $321.1 million reported as of the end of March. Trailing AQR Capital Management was Zimmer Partners, which amassed a stake valued at $240.3 million. Adage Capital Management, Renaissance Technologies, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Public Service Enterprise Group Incorporated (NYSE:PEG) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds that decided to sell off their positions entirely heading into Q3. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest position of the 700 funds followed by Insider Monkey, comprising close to $87.8 million in stock, and Jonathan Barrett and Paul Segal’s Luminus Management was right behind this move, as the fund dumped about $50.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q3.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Public Service Enterprise Group Incorporated (NYSE:PEG) but similarly valued. We will take a look at HP Inc. (NYSE:HPQ), Credit Suisse Group AG (NYSE:CS), Thomson Reuters Corporation (NYSE:TRI), and Monster Beverage Corp (NASDAQ:MNST). All of these stocks’ market caps are closest to PEG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HPQ | 35 | 868419 | -5 |
| CS | 14 | 194661 | 0 |
| TRI | 17 | 227269 | -2 |
| MNST | 33 | 2067252 | 1 |
| Average | 24.75 | 839400 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $839 million. That figure was $1019 million in PEG’s case. HP Inc. (NYSE:HPQ) is the most popular stock in this table. On the other hand Credit Suisse Group AG (NYSE:CS) is the least popular one with only 14 bullish hedge fund positions. Public Service Enterprise Group Incorporated (NYSE:PEG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately PEG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PEG were disappointed as the stock returned -1.2% during the same 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
