Is Sempra Energy (SRE) Going to Burn These Hedge Funds?

Is Sempra Energy (NYSE:SRE) a good investment?

Now, according to many of your peers, hedge funds are seen as delayed, old investment tools of a forgotten age. Although there are more than 8,000 hedge funds in operation today, this site looks at the moguls of this club, around 525 funds. It is assumed that this group controls the lion’s share of all hedge funds’ total assets, and by monitoring their highest performing investments, we’ve unsheathed a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).

Just as necessary, positive insider trading activity is a second way to analyze the world of equities. Obviously, there are plenty of stimuli for an executive to downsize shares of his or her company, but just one, very clear reason why they would initiate a purchase. Various academic studies have demonstrated the valuable potential of this tactic if you know where to look (learn more here).

Keeping this in mind, it’s important to analyze the recent info surrounding Sempra Energy (NYSE:SRE).

Hedge fund activity in Sempra Energy (NYSE:SRE)

At the end of the second quarter, a total of 21 of the hedge funds we track were long in this stock, a change of 40% from the first quarter. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially.

When using filings from the hedgies we track, Israel Englander’s Millennium Management had the most valuable position in Sempra Energy (NYSE:SRE), worth close to $93.8 million, comprising 0.3% of its total 13F portfolio. Coming in second is Louis Navellier of Navellier & Associates, with a $49 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Remaining peers that are bullish include John A. Levin’s Levin Capital Strategies, Phill Gross and Robert Atchinson’s Adage Capital Management and David Harding’s Winton Capital Management.

As industrywide interest increased, certain money managers have jumped into Sempra Energy (NYSE:SRE) headfirst. Millennium Management, managed by Israel Englander, established the most outsized position in Sempra Energy (NYSE:SRE). Millennium Management had 93.8 million invested in the company at the end of the quarter. Louis Navellier’s Navellier & Associates also initiated a $49 million position during the quarter. The following funds were also among the new SRE investors: John A. Levin’s Levin Capital Strategies, Phill Gross and Robert Atchinson’s Adage Capital Management, and David Harding’s Winton Capital Management.

Insider trading activity in Sempra Energy (NYSE:SRE)

Insider buying made by high-level executives is most useful when the company in focus has experienced transactions within the past half-year. Over the last 180-day time frame, Sempra Energy (NYSE:SRE) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Sempra Energy (NYSE:SRE). These stocks are Western Gas Equity Partners LP (NYSE:WGP), National Grid plc (ADR) (NYSE:NGG), ONEOK, Inc. (NYSE:OKE), EQT Corporation (NYSE:EQT), and TransCanada Corporation (USA) (NYSE:TRP). All of these stocks are in the gas utilities industry and their market caps are similar to SRE’s market cap.

Using the results demonstrated by our strategies, average investors must always watch hedge fund and insider trading activity, and Sempra Energy (NYSE:SRE) shareholders fit into this picture quite nicely.

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