Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Xcel Energy Inc (NYSE:XEL) was in 17 hedge funds’ portfolios at the end of September. XEL has experienced a decrease in activity from the world’s largest hedge funds recently. There were 18 hedge funds in our database with XEL positions at the end of the previous quarter. Our calculations also showed that XEL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most investors, hedge funds are perceived as unimportant, outdated financial tools of yesteryear. While there are greater than 8000 funds in operation at present, Our researchers choose to focus on the elite of this club, approximately 750 funds. Most estimates calculate that this group of people have their hands on bulk of all hedge funds’ total capital, and by watching their unrivaled stock picks, Insider Monkey has spotted various investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s view the recent hedge fund action encompassing Xcel Energy Inc (NYSE:XEL).
How are hedge funds trading Xcel Energy Inc (NYSE:XEL)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards XEL over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Xcel Energy Inc (NYSE:XEL), which was worth $340.3 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $84.7 million worth of shares. AQR Capital Management, Balyasny Asset Management, and Two Sigma Advisors 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 Winton Capital Management allocated the biggest weight to Xcel Energy Inc (NYSE:XEL), around 1% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.29 percent of its 13F equity portfolio to XEL.
Due to the fact that Xcel Energy Inc (NYSE:XEL) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there were a few hedge funds who were dropping their full holdings last quarter. Intriguingly, Peter J. Hark’s Shelter Harbor Advisors sold off the largest investment of the 750 funds watched by Insider Monkey, comprising an estimated $7.4 million in stock. Jeffrey Talpins’s fund, Element Capital Management, also cut its stock, about $1.4 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 1 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Xcel Energy Inc (NYSE:XEL) but similarly valued. These stocks are Thomson Reuters Corporation (NYSE:TRI), Lam Research Corporation (NASDAQ:LRCX), General Mills, Inc. (NYSE:GIS), and Cognizant Technology Solutions Corp (NASDAQ:CTSH). All of these stocks’ market caps match XEL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRI | 19 | 360770 | 2 |
| LRCX | 47 | 2130443 | 12 |
| GIS | 35 | 916081 | -4 |
| CTSH | 40 | 2368649 | 7 |
| Average | 35.25 | 1443986 | 4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.25 hedge funds with bullish positions and the average amount invested in these stocks was $1444 million. That figure was $573 million in XEL’s case. Lam Research Corporation (NASDAQ:LRCX) is the most popular stock in this table. On the other hand Thomson Reuters Corporation (NYSE:TRI) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Xcel Energy Inc (NYSE:XEL) is even less popular than TRI. Hedge funds dodged a bullet by taking a bearish stance towards XEL. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately XEL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); XEL investors were disappointed as the stock returned -5.2% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
