Is ES Stock A Buy or Sell?

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 Eversource Energy (NYSE:ES).

Is ES stock a buy? Eversource Energy (NYSE:ES) shareholders have witnessed an increase in hedge fund sentiment lately. Eversource Energy (NYSE:ES) was in 24 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 28. There were 20 hedge funds in our database with ES positions at the end of the third quarter. Our calculations also showed that ES isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Bruce Kovner of Caxton Associates LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. Keeping this in mind we’re going to review the recent hedge fund action regarding Eversource Energy (NYSE:ES).

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

At the end of December, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ES over the last 22 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Zimmer Partners was the largest shareholder of Eversource Energy (NYSE:ES), with a stake worth $109.5 million reported as of the end of December. Trailing Zimmer Partners was Millennium Management, which amassed a stake valued at $90.8 million. D E Shaw, Citadel Investment Group, and AQR 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 Coann Capital allocated the biggest weight to Eversource Energy (NYSE:ES), around 8.53% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, dishing out 1.61 percent of its 13F equity portfolio to ES.

As aggregate interest increased, key money managers have jumped into Eversource Energy (NYSE:ES) headfirst. Citadel Investment Group, managed by Ken Griffin, established the most outsized position in Eversource Energy (NYSE:ES). Citadel Investment Group had $53.5 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $33.1 million investment in the stock during the quarter. The other funds with brand new ES positions are Renaissance Technologies, Matthew Davis’s Coann Capital, and Bruce Kovner’s Caxton Associates LP.

Let’s now review hedge fund activity in other stocks similar to Eversource Energy (NYSE:ES). We will take a look at Public Service Enterprise Group Incorporated (NYSE:PEG), Otis Worldwide Corporation (NYSE:OTIS), Rockwell Automation Inc. (NYSE:ROK), EOG Resources Inc (NYSE:EOG), Banco Bradesco SA (NYSE:BBD), WEC Energy Group, Inc. (NYSE:WEC), and Teladoc Health, Inc (NYSE:TDOC). This group of stocks’ market values are similar to ES’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1077 million. That figure was $512 million in ES’s case. Otis Worldwide Corporation (NYSE:OTIS) is the most popular stock in this table. On the other hand Banco Bradesco SA (NYSE:BBD) is the least popular one with only 17 bullish hedge fund positions. Eversource Energy (NYSE:ES) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ES is 43. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately ES wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); ES investors were disappointed as the stock returned 4% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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