Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: NRG Energy Inc (NYSE:NRG).
NRG Energy Inc (NYSE:NRG) was in 31 hedge funds’ portfolios at the end of September. NRG investors should be aware of an increase in hedge fund interest recently. There were 25 hedge funds in our database with NRG holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as B/E Aerospace Inc (NASDAQ:BEAV), Great Plains Energy Incorporated (NYSE:GXP), and Royal Gold, Inc USA) (NASDAQ:RGLD) to gather more data points.
Follow Nrg Energy Inc. (NYSE:NRG)
Follow Nrg Energy Inc. (NYSE:NRG)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, let’s review the new action surrounding NRG Energy Inc (NYSE:NRG).
How have hedgies been trading NRG Energy Inc (NYSE:NRG)?
Heading into the fourth quarter of 2016, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 24% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Clint Carlson’s Carlson Capital has the number one position in NRG Energy Inc (NYSE:NRG), worth close to $164.6 million, amounting to 2.1% of its total 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $24.6 million position. Other professional money managers that are bullish include Glenn Russell Dubin’s Highbridge Capital Management, and David Costen Haley’s HBK Investments.
As one would reasonably expect, some big names were leading the bulls’ herd. Tourbillon Capital Partners, managed by Jason Karp, created the biggest call position in NRG Energy Inc (NYSE:NRG). Tourbillon Capital Partners had $19.4 million invested in the company at the end of the quarter. Jonathan Barrett and Paul Segal’s Luminus Management also made a $5.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Jos Shaver’s Electron Capital Partners, George Hall’s Clinton Group, and Mike Vranos’ Ellington.
Let’s go over hedge fund activity in other stocks similar to NRG Energy Inc (NYSE:NRG). These stocks are B/E Aerospace Inc (NASDAQ:BEAV), Great Plains Energy Incorporated (NYSE:GXP), Royal Gold, Inc USA) (NASDAQ:RGLD), and Hertz Global Holdings, Inc. (NYSE:HTZ). All of these stocks’ market caps are closest to NRG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BEAV | 33 | 992778 | 0 |
| GXP | 33 | 1194270 | 8 |
| RGLD | 19 | 192207 | 2 |
| HTZ | 43 | 1545148 | 5 |
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 $981 million. That figure was $331 million in NRG’s case. Hertz Global Holdings, Inc. (NYSE:HTZ) is the most popular stock in this table. On the other hand Royal Gold, Inc USA) (NASDAQ:RGLD) is the least popular one with only 19 bullish hedge fund positions. NRG Energy Inc (NYSE:NRG) 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 HTZ might be a better candidate to consider a long position.
Disclosure: None
