Is Duke Energy Corporation (NYSE:DUK) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is DUK a good stock to buy now? The best stock pickers were getting more bullish. The number of bullish hedge fund positions inched up by 3 lately. Duke Energy Corporation (NYSE:DUK) was in 36 hedge funds’ portfolios at the end of September. The all time high for this statistic is 37. Our calculations also showed that DUK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Stuart Zimmer of Zimmer Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind we’re going to take a look at the latest hedge fund action regarding Duke Energy Corporation (NYSE:DUK).
Do Hedge Funds Think DUK Is A Good Stock To Buy Now?
At third quarter’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in DUK over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Two Sigma Advisors was the largest shareholder of Duke Energy Corporation (NYSE:DUK), with a stake worth $175.5 million reported as of the end of September. Trailing Two Sigma Advisors was D E Shaw, which amassed a stake valued at $132.3 million. Citadel Investment Group, Zimmer Partners, and Adage Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Claar Advisors allocated the biggest weight to Duke Energy Corporation (NYSE:DUK), around 4.25% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, dishing out 1.27 percent of its 13F equity portfolio to DUK.
Consequently, key hedge funds were breaking ground themselves. Zimmer Partners, managed by Stuart J. Zimmer, assembled the most outsized position in Duke Energy Corporation (NYSE:DUK). Zimmer Partners had $81.9 million invested in the company at the end of the quarter. Frank Brosens’s Taconic Capital also made a $8.9 million investment in the stock during the quarter. The following funds were also among the new DUK investors: Dmitry Balyasny’s Balyasny Asset Management, Carl Tiedemann and Michael Tiedemann’s TIG Advisors, and Louis Bacon’s Moore Global Investments.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Duke Energy Corporation (NYSE:DUK) but similarly valued. These stocks are Uber Technologies, Inc. (NYSE:UBER), The Sherwin-Williams Company (NYSE:SHW), Activision Blizzard, Inc. (NASDAQ:ATVI), Cigna Corporation (NYSE:CI), Illinois Tool Works Inc. (NYSE:ITW), NetEase, Inc (NASDAQ:NTES), and VMware, Inc. (NYSE:VMW). This group of stocks’ market caps resemble DUK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UBER | 100 | 5978770 | 6 |
| SHW | 55 | 1779583 | 2 |
| ATVI | 93 | 4222431 | -4 |
| CI | 62 | 2751729 | -10 |
| ITW | 39 | 565865 | 4 |
| NTES | 45 | 3666807 | 7 |
| VMW | 31 | 468712 | -11 |
| Average | 60.7 | 2776271 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 60.7 hedge funds with bullish positions and the average amount invested in these stocks was $2776 million. That figure was $757 million in DUK’s case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand VMware, Inc. (NYSE:VMW) is the least popular one with only 31 bullish hedge fund positions. Duke Energy Corporation (NYSE:DUK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DUK is 40.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and surpassed the market again by 16.4 percentage points. Unfortunately DUK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DUK investors were disappointed as the stock returned 3% since the end of September (through 12/18) 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 in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
