Was The Smart Money Right About FirstEnergy Corp. (FE)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 887 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of FirstEnergy Corp. (NYSE:FE).

FirstEnergy Corp. (NYSE:FE) investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. FirstEnergy Corp. (NYSE:FE) was in 50 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 59. Our calculations also showed that FE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a multitude of metrics investors have at their disposal to appraise stocks. A couple of the most under-the-radar metrics are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top fund managers can outpace the broader indices by a superb amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .

Michael Weinstock of Monarch Alternative Capital

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 review the fresh hedge fund action surrounding FirstEnergy Corp. (NYSE:FE).

Do Hedge Funds Think FE Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FE over the last 22 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Two Sigma Advisors, managed by John Overdeck and David Siegel, holds the most valuable position in FirstEnergy Corp. (NYSE:FE). Two Sigma Advisors has a $144.2 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by D E Shaw, led by D. E. Shaw, holding a $136.5 million position; 0.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions include Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, Michael A. Price and Amos Meron’s Empyrean Capital Partners and Ari Zweiman’s 683 Capital Partners. In terms of the portfolio weights assigned to each position Madison Avenue Partners allocated the biggest weight to FirstEnergy Corp. (NYSE:FE), around 13.83% of its 13F portfolio. Silver Point Capital is also relatively very bullish on the stock, earmarking 6.13 percent of its 13F equity portfolio to FE.

Judging by the fact that FirstEnergy Corp. (NYSE:FE) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of money managers that slashed their positions entirely last quarter. It’s worth mentioning that Jos Shaver’s Electron Capital Partners said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, worth about $76.4 million in stock. Zilvinas Mecelis’s fund, Covalis Capital, also dropped its stock, about $17.1 million worth. These moves are important to note, as total hedge fund interest dropped by 9 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to FirstEnergy Corp. (NYSE:FE). We will take a look at Monolithic Power Systems, Inc. (NASDAQ:MPWR), The Liberty SiriusXM Group (NASDAQ:LSXMA), Carnival Corporation & plc (NYSE:CUK), Logitech International SA (NASDAQ:LOGI), Tractor Supply Company (NASDAQ:TSCO), Sun Communities Inc (NYSE:SUI), and Solaredge Technologies Inc (NASDAQ:SEDG). This group of stocks’ market caps are closest to FE’s market cap.

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As you can see these stocks had an average of 27.7 hedge funds with bullish positions and the average amount invested in these stocks was $732 million. That figure was $1305 million in FE’s case. The Liberty SiriusXM Group (NASDAQ:LSXMA) is the most popular stock in this table. On the other hand Carnival Corporation & plc (NYSE:CUK) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks FirstEnergy Corp. (NYSE:FE) is more popular among hedge funds. Our overall hedge fund sentiment score for FE is 71.4. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on FE as the stock returned 25.4% since the end of December (through 4/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.