Is PEG Stock A Buy or Sell?

In this article we will check out the progression of hedge fund sentiment towards Public Service Enterprise Group Incorporated (NYSE:PEG) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is PEG stock a buy? The best stock pickers were in a bullish mood. The number of long hedge fund positions increased by 5 recently. Public Service Enterprise Group Incorporated (NYSE:PEG) was in 28 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 34. Our calculations also showed that PEG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 124 percentage points since March 2017 (see the details here).

Michael Gelband of ExodusPoint Capital

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. With all of this in mind let’s review the recent hedge fund action encompassing Public Service Enterprise Group Incorporated (NYSE:PEG).

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

At fourth quarter’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from one quarter earlier. On the other hand, there were a total of 31 hedge funds with a bullish position in PEG a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Among these funds, Zimmer Partners held the most valuable stake in Public Service Enterprise Group Incorporated (NYSE:PEG), which was worth $121.9 million at the end of the fourth quarter. On the second spot was Adage Capital Management which amassed $73 million worth of shares. AQR Capital Management, Two Sigma Advisors, and ExodusPoint Capital 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 Ecofin Ltd allocated the biggest weight to Public Service Enterprise Group Incorporated (NYSE:PEG), around 3.9% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, designating 1.79 percent of its 13F equity portfolio to PEG.

As one would reasonably expect, key hedge funds have been driving this bullishness. Caxton Associates LP, managed by Bruce Kovner, initiated the largest position in Public Service Enterprise Group Incorporated (NYSE:PEG). Caxton Associates LP had $8.8 million invested in the company at the end of the quarter. Charles Davidson and Joseph Jacobs’s Wexford Capital also made a $3.1 million investment in the stock during the quarter. The following funds were also among the new PEG investors: Nicholas Bagnall’s Te Ahumairangi Investment Management, Alec Litowitz and Ross Laser’s Magnetar Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Public Service Enterprise Group Incorporated (NYSE:PEG) but similarly valued. We will take a look at 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), Teladoc Health, Inc (NYSE:TDOC), and Huazhu Group Limited (NASDAQ:HTHT). All of these stocks’ market caps resemble PEG’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.3 hedge funds with bullish positions and the average amount invested in these stocks was $1111 million. That figure was $374 million in PEG’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. Public Service Enterprise Group Incorporated (NYSE:PEG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PEG is 47.8. 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 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 PEG wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); PEG investors were disappointed as the stock returned 9.9% 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.

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