Is FirstEnergy Corp. (NYSE:FE) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments (for some reason media paid a ton of attention to Ackman’s gigantic JC Penney and Valeant failures) and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
FirstEnergy Corp was in 24 hedge funds’ portfolios at the end of September. FE investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. There were 21 hedge funds in our database with FE positions at the end of the previous quarter. At the end of this article we will also compare FE to other stocks, including Workday Inc (NYSE:WDAY), Red Hat, Inc. (NYSE:RHT), and Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) to get a better sense of its popularity.
Follow Firstenergy Corp (NYSE:FE)
Follow Firstenergy Corp (NYSE:FE)
In today’s marketplace there are plenty of gauges market participants put to use to analyze their stock investments. Two of the most underrated gauges are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the best fund managers can trounce the S&P 500 by a healthy amount (see the details here).
With all of this in mind, we’re going to analyze the recent action surrounding FirstEnergy Corp. (NYSE:FE).
How are hedge funds trading FirstEnergy Corp. (NYSE:FE)?
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a rise of 14% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Jonathan Barrett and Paul Segal’s Luminus Management has the most valuable position in FirstEnergy Corp. (NYSE:FE), worth close to $228.2 million, comprising 7.1% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, managed by Jim Simons, which holds a $71.5 million position; 0.2% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions contain Israel Englander’s Millennium Management, Glenn Russell Dubin’s Highbridge Capital Management and Cliff Asness’s AQR Capital Management.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most outsized call position in FirstEnergy Corp. (NYSE:FE). The fund had $18.8 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated an $11.6 million position during the quarter. The following funds were also among the new FE investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Paul Tudor Jones’s Tudor Investment Corp, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
Let’s also examine hedge fund activity in other stocks similar to FirstEnergy Corp. (NYSE:FE). These stocks are Workday Inc (NYSE:WDAY), Red Hat, Inc. (NYSE:RHT), Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH), and Loews Corporation (NYSE:L). All of these stocks’ market caps are similar to FE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WDAY | 28 | 1019376 | 2 |
| RHT | 41 | 554846 | 1 |
| NCLH | 38 | 745372 | 0 |
| L | 19 | 1010435 | -7 |
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $833 million. That figure was $558 million in FE’s case, not a positive signal. Red Hat, Inc. (NYSE:RHT) is the most popular stock in this table, while Loews Corporation (NYSE:L) is the laggard with only 19 bullish hedge fund positions. FirstEnergy Corp. (NYSE:FE) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RHT might be a better candidate to consider a long position.
