At Insider Monkey, we pore over the filings of nearly 887 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31st. In this article, we will use that wealth of knowledge to determine whether or not Nextera Energy Partners LP (NYSE:NEP) makes for a good investment right now.
Is NEP stock a buy? The smart money was turning bullish. The number of long hedge fund bets improved by 10 lately. Nextera Energy Partners LP (NYSE:NEP) was in 32 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NEP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 124 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.
Bruce Kovner of Caxton Associates LP
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 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. With all of this in mind we’re going to analyze the latest hedge fund action regarding Nextera Energy Partners LP (NYSE:NEP).
Do Hedge Funds Think NEP Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 45% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in NEP a year ago. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Electron Capital Partners held the most valuable stake in Nextera Energy Partners LP (NYSE:NEP), which was worth $73 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $39.6 million worth of shares. Holocene Advisors, Millennium Management, and Citadel Investment Group 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 Electron Capital Partners allocated the biggest weight to Nextera Energy Partners LP (NYSE:NEP), around 5.01% of its 13F portfolio. Ecofin Ltd is also relatively very bullish on the stock, earmarking 4.35 percent of its 13F equity portfolio to NEP.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Caxton Associates LP, managed by Bruce Kovner, assembled the most outsized position in Nextera Energy Partners LP (NYSE:NEP). Caxton Associates LP had $9.9 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also made a $5.7 million investment in the stock during the quarter. The other funds with brand new NEP positions are Highbridge Capital Management, D. E. Shaw’s D E Shaw, and George Soros’s Soros Fund Management.
Let’s now take a look at hedge fund activity in other stocks similar to Nextera Energy Partners LP (NYSE:NEP). We will take a look at New York Community Bancorp, Inc. (NYSE:NYCB), Pinnacle Financial Partners (NASDAQ:PNFP), Virtu Financial Inc (NASDAQ:VIRT), Allison Transmission Holdings Inc (NYSE:ALSN), Essent Group Ltd (NYSE:ESNT), Pacific Biosciences of California (NASDAQ:PACB), and LiveRamp Holdings, Inc. (NYSE:RAMP). This group of stocks’ market caps are similar to NEP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NYCB | 25 | 244102 | -3 |
| PNFP | 13 | 59770 | -9 |
| VIRT | 27 | 227716 | 1 |
| ALSN | 25 | 609196 | -5 |
| ESNT | 32 | 296283 | 10 |
| PACB | 23 | 1483936 | -2 |
| RAMP | 24 | 257256 | -4 |
| Average | 24.1 | 454037 | -1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $454 million. That figure was $294 million in NEP’s case. Essent Group Ltd (NYSE:ESNT) is the most popular stock in this table. On the other hand Pinnacle Financial Partners (NASDAQ:PNFP) is the least popular one with only 13 bullish hedge fund positions. Nextera Energy Partners LP (NYSE:NEP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NEP is 90. 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. 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 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on NEP, though not to the same extent, as the stock returned 8.9% since Q4 (through April 12th) and outperformed the market as well.
Follow Nextera Energy Partners Lp (NYSE:NEP)
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Disclosure: None. This article was originally published at Insider Monkey.
