Was The Smart Money Right About NextEra Energy, Inc. (NEE)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 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 September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought NextEra Energy, Inc. (NYSE:NEE) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.

Is NextEra Energy, Inc. (NYSE:NEE) a buy right now? Money managers were getting less optimistic. The number of long hedge fund bets fell by 6 in recent months. NextEra Energy, Inc. (NYSE:NEE) was in 53 hedge funds’ portfolios at the end of September. The all time high for this statistic is 64. Our calculations also showed that NEE 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 review the new hedge fund action surrounding NextEra Energy, Inc. (NYSE:NEE).

Phillip Gross of Adage Capital

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

At third quarter’s end, a total of 53 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NEE over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in NextEra Energy, Inc. (NYSE:NEE) was held by Fisher Asset Management, which reported holding $1145.9 million worth of stock at the end of September. It was followed by D E Shaw with a $264.4 million position. Other investors bullish on the company included Adage Capital Management, Citadel Investment Group, and AQR Capital Management. In terms of the portfolio weights assigned to each position Quaero Capital allocated the biggest weight to NextEra Energy, Inc. (NYSE:NEE), around 4.55% of its 13F portfolio. Coann Capital is also relatively very bullish on the stock, designating 4.3 percent of its 13F equity portfolio to NEE.

Due to the fact that NextEra Energy, Inc. (NYSE:NEE) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few fund managers who sold off their entire stakes in the third quarter. Interestingly, Doug Silverman and Alexander Klabin’s Senator Investment Group dropped the largest investment of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $47.6 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $24.7 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 6 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as NextEra Energy, Inc. (NYSE:NEE) but similarly valued. These stocks are Linde plc (NYSE:LIN), Charter Communications, Inc. (NASDAQ:CHTR), Philip Morris International Inc. (NYSE:PM), Intuit Inc. (NASDAQ:INTU), Honeywell International Inc. (NASDAQ:HON), QUALCOMM, Incorporated (NASDAQ:QCOM), and Citigroup Inc. (NYSE:C). This group of stocks’ market caps resemble NEE’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 60.9 hedge funds with bullish positions and the average amount invested in these stocks was $6525 million. That figure was $2374 million in NEE’s case. Citigroup Inc. (NYSE:C) is the most popular stock in this table. On the other hand Honeywell International Inc. (NASDAQ:HON) is the least popular one with only 45 bullish hedge fund positions. NextEra Energy, Inc. (NYSE:NEE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NEE is 35.6. 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 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 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on NEE as the stock returned -0.1% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.

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