Is Dominion Energy Inc. (D) A Good Stock To Buy?

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Dominion Energy Inc. (NYSE:D).

Is D a good stock to buy? Dominion Energy Inc. (NYSE:D) was in 27 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 47. D investors should pay attention to a decrease in enthusiasm from smart money of late. There were 34 hedge funds in our database with D positions at the end of the second quarter. Our calculations also showed that D isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Now let’s go over the fresh hedge fund action surrounding Dominion Energy Inc. (NYSE:D).

Zilvinas Mecelis of Covalis Capital

Do Hedge Funds Think D Is A Good Stock To Buy Now?

At the end of September, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the second quarter of 2021. By comparison, 37 hedge funds held shares or bullish call options in D a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the number one position in Dominion Energy Inc. (NYSE:D). D E Shaw has a $156.6 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Steve Cohen of Point72 Asset Management, with a $84 million position; 0.4% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism consist of 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 2.22% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, earmarking 1.51 percent of its 13F equity portfolio to D.

Due to the fact that Dominion Energy Inc. (NYSE:D) has witnessed a decline in interest from the smart money, logic holds that there lies a certain “tier” of funds that slashed their positions entirely heading into Q4. At the top of the heap, Matthew Stadelman’s Diamond Hill Capital dumped the biggest stake of the “upper crust” of funds tracked by Insider Monkey, comprising close to $270.5 million in stock. Mika Toikka’s fund, AlphaCrest Capital Management, also said goodbye to its stock, about $5.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 7 funds heading into Q4.

Let’s check out 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 America Movil SAB de CV (NYSE:AMX), NIO Inc. (NYSE:NIO), FedEx Corporation (NYSE:FDX), América Móvil, S.A.B. de C.V. (NYSE:AMOV), Northrop Grumman Corporation (NYSE:NOC), NetEase, Inc (NASDAQ:NTES), and Air Products & Chemicals, Inc. (NYSE:APD). This group of stocks’ market valuations are similar to D’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $965 million. That figure was $545 million in D’s case. FedEx Corporation (NYSE:FDX) is the most popular stock in this table. On the other hand América Móvil, S.A.B. de C.V. (NYSE:AMOV) is the least popular one with only 1 bullish hedge fund positions. Dominion Energy Inc. (NYSE:D) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for D is 42.3. 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 positive signal but 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 beat the market again by 5.1 percentage points. Unfortunately D wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on D were disappointed as the stock returned 5.3% 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 many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.