Is Sempra Energy (NYSE:SRE) 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.
Sempra Energy (NYSE:SRE) has seen an increase in support from the world’s most elite money managers of late. Sempra Energy (NYSE:SRE) was in 28 hedge funds’ portfolios at the end of June. The all time high for this statistic is 35. There were 27 hedge funds in our database with SRE holdings at the end of March. Our calculations also showed that SRE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Now let’s view the key hedge fund action encompassing Sempra Energy (NYSE:SRE).
Do Hedge Funds Think SRE Is A Good Stock To Buy Now?
At Q2’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. On the other hand, there were a total of 35 hedge funds with a bullish position in SRE a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the largest position in Sempra Energy (NYSE:SRE). Citadel Investment Group has a $137.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Citadel Investment Group’s heels is Phill Gross and Robert Atchinson of Adage Capital Management, with a $45.3 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish contain Steve Cohen’s Point72 Asset Management, Cliff Asness’s AQR Capital Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Coann Capital allocated the biggest weight to Sempra Energy (NYSE:SRE), around 6.44% of its 13F portfolio. Socorro Asset Management is also relatively very bullish on the stock, earmarking 3.48 percent of its 13F equity portfolio to SRE.
Consequently, specific money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, established the most valuable position in Sempra Energy (NYSE:SRE). Balyasny Asset Management had $9 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $8.9 million position during the quarter. The other funds with brand new SRE positions are Michael Gelband’s ExodusPoint Capital, Qing Li’s Sciencast Management, and Steve Pattyn’s Yaupon Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sempra Energy (NYSE:SRE) but similarly valued. These stocks are CRH PLC (NYSE:CRH), SYSCO Corporation (NYSE:SYY), Pioneer Natural Resources Company (NYSE:PXD), Parker-Hannifin Corporation (NYSE:PH), O’Reilly Automotive Inc (NASDAQ:ORLY), Marathon Petroleum Corp (NYSE:MPC), and The Allstate Corporation (NYSE:ALL). This group of stocks’ market values are similar to SRE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CRH | 9 | 90599 | 0 |
| SYY | 40 | 2600524 | -2 |
| PXD | 45 | 876323 | 8 |
| PH | 42 | 1446066 | -1 |
| ORLY | 44 | 2366019 | -1 |
| MPC | 48 | 2616162 | 2 |
| ALL | 33 | 923765 | -8 |
| Average | 37.3 | 1559923 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.3 hedge funds with bullish positions and the average amount invested in these stocks was $1560 million. That figure was $344 million in SRE’s case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 9 bullish hedge fund positions. Sempra Energy (NYSE:SRE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SRE is 54.4. 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 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately SRE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SRE investors were disappointed as the stock returned -1.4% since the end of June (through 10/15) 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.
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Disclosure: None. This article was originally published at Insider Monkey.
