Should You Avoid Consolidated Edison, Inc. (ED)?

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Consolidated Edison, Inc. (NYSE:ED) from the perspective of those elite funds.

Consolidated Edison, Inc. (NYSE:ED) has seen a decrease in hedge fund sentiment recently. At the end of this article we will also compare ED to other stocks including Ameriprise Financial, Inc. (NYSE:AMP), Cummins Inc. (NYSE:CMI), and CBS Corporation (NYSE:CBS) to get a better sense of its popularity.

Keeping this in mind, let’s take a glance at the fresh action regarding Consolidated Edison, Inc. (NYSE:ED).

How have hedgies been trading Consolidated Edison, Inc. (NYSE:ED)?

At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in Consolidated Edison, Inc. (NYSE:ED). AQR Capital Management has a $180.4 million position in the stock, comprising 0.4% of its 13F portfolio. The second most bullish fund manager is Seminole Capital (Investment Mgmt), managed by Michael Messner, which holds a $55.3 million position; 2.5% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism contain Jim Simons’ Renaissance Technologies, Peter Muller’s PDT Partners and David Harding’s Winton Capital Management.

Judging by the fact that Consolidated Edison, Inc. (NYSE:ED) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there were a few funds that decided to sell off their full holdings by the end of the third quarter. At the top of the heap, Stuart J. Zimmer’s Zimmer Partners dropped the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at about $11.6 million in stock. Robert Vollero and Gentry T. Beach’s fund, Vollero Beach Capital Partners, also dropped its stock, about $5.1 million worth. These moves are interesting, as total hedge fund interest dropped by 1 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Consolidated Edison, Inc. (NYSE:ED) but similarly valued. These stocks are Ameriprise Financial, Inc. (NYSE:AMP), Cummins Inc. (NYSE:CMI), CBS Corporation (NYSE:CBS), and Williams Partners L.P. (NYSE:WPZ). This group of stocks’ market values resemble ED’s market value.

As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $1281 million. That figure was $309 million in ED’s case. CBS Corporation (NYSE:CBS) is the most popular stock in this table. On the other hand Williams Partners L.P. (NYSE:WPZ) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Consolidated Edison, Inc. (NYSE:ED) is even less popular than WPZ. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.