Is NRG Energy Inc (NYSE:NRG) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
NRG Energy Inc (NYSE:NRG) was in 34 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 50. NRG shareholders have witnessed an increase in hedge fund sentiment lately. There were 33 hedge funds in our database with NRG positions at the end of the second quarter. Our calculations also showed that NRG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a gander at the new hedge fund action encompassing NRG Energy Inc (NYSE:NRG).
Do Hedge Funds Think NRG Is A Good Stock To Buy Now?
At the end of September, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NRG over the last 25 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Richard S. Pzena’s Pzena Investment Management has the number one position in NRG Energy Inc (NYSE:NRG), worth close to $673 million, accounting for 2.7% of its total 13F portfolio. Sitting at the No. 2 spot is Permian Investment Partners, managed by Alex Duran and Scott Hendrickson, which holds a $308 million position; 30.6% of its 13F portfolio is allocated to the stock. Other peers that are bullish encompass Andrew Wellington and Jeff Keswin’s Lyrical Asset Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt. and Robert Pitts’s Steadfast Capital Management. In terms of the portfolio weights assigned to each position Permian Investment Partners allocated the biggest weight to NRG Energy Inc (NYSE:NRG), around 30.57% of its 13F portfolio. MD Sass is also relatively very bullish on the stock, dishing out 5.03 percent of its 13F equity portfolio to NRG.
As aggregate interest increased, key money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, created the most valuable position in NRG Energy Inc (NYSE:NRG). Balyasny Asset Management had $68.8 million invested in the company at the end of the quarter. Alex Duran and Scott Hendrickson’s Permian Investment Partners also initiated a $36.2 million position during the quarter. The following funds were also among the new NRG investors: Renaissance Technologies, Matthew Hulsizer’s PEAK6 Capital Management, and D. E. Shaw’s D E Shaw.
Let’s now review hedge fund activity in other stocks similar to NRG Energy Inc (NYSE:NRG). We will take a look at Bausch Health Companies (NYSE:BHC), SYNNEX Corporation (NYSE:SNX), Deckers Outdoor Corp (NASDAQ:DECK), Five Below Inc (NASDAQ:FIVE), Cleveland-Cliffs Inc (NYSE:CLF), Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH), and Guidewire Software Inc (NYSE:GWRE). This group of stocks’ market values match NRG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BHC | 39 | 3840623 | -6 |
| SNX | 24 | 596081 | 4 |
| DECK | 48 | 1213165 | 4 |
| FIVE | 40 | 996155 | -2 |
| CLF | 35 | 682055 | -9 |
| NCLH | 36 | 502017 | -7 |
| GWRE | 26 | 2005849 | -1 |
| Average | 35.4 | 1405135 | -2.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.4 hedge funds with bullish positions and the average amount invested in these stocks was $1405 million. That figure was $1992 million in NRG’s case. Deckers Outdoor Corp (NASDAQ:DECK) is the most popular stock in this table. On the other hand SYNNEX Corporation (NYSE:SNX) is the least popular one with only 24 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. Our overall hedge fund sentiment score for NRG is 47.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately NRG wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NRG investors were disappointed as the stock returned -11.1% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Nrg Energy Inc. (NYSE:NRG)
Follow Nrg Energy Inc. (NYSE:NRG)
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Disclosure: None. This article was originally published at Insider Monkey.
