We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Quanta Services Inc (NYSE:PWR) and determine whether hedge funds skillfully traded this stock.
Is Quanta Services Inc (NYSE:PWR) a buy right now? Money managers were reducing their bets on the stock. The number of bullish hedge fund bets retreated by 2 lately. Quanta Services Inc (NYSE:PWR) was in 38 hedge funds’ portfolios at the end of September. The all time high for this statistic is 44. Our calculations also showed that PWR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 40 hedge funds in our database with PWR positions at the end of the second quarter.
Aaron Cowen of Suvretta Capital Management
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. Now we’re going to take a glance at the new hedge fund action encompassing Quanta Services Inc (NYSE:PWR).
Do Hedge Funds Think PWR Is A Good Stock To Buy Now?
At the end of September, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PWR over the last 25 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, William Harnisch’s Peconic Partners LLC has the most valuable position in Quanta Services Inc (NYSE:PWR), worth close to $633.4 million, accounting for 56.2% of its total 13F portfolio. The second largest stake is held by David S. Winter and David J. Millstone of 40 North Management, with a $175.6 million position; the fund has 5.4% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish comprise Aaron Cowen’s Suvretta Capital Management, Jos Shaver’s Electron Capital Partners and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Peconic Partners LLC allocated the biggest weight to Quanta Services Inc (NYSE:PWR), around 56.2% of its 13F portfolio. Electron Capital Partners is also relatively very bullish on the stock, designating 5.76 percent of its 13F equity portfolio to PWR.
Since Quanta Services Inc (NYSE:PWR) has faced bearish sentiment from hedge fund managers, logic holds that there was a specific group of hedgies that elected to cut their positions entirely last quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management cut the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $10.9 million in stock. Peter Avellone’s fund, Cartenna Capital, also cut its stock, about $6.8 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Quanta Services Inc (NYSE:PWR). These stocks are IDEX Corporation (NYSE:IEX), UDR, Inc. (NYSE:UDR), The Liberty SiriusXM Group (NASDAQ:LSXMA), Textron Inc. (NYSE:TXT), Brown & Brown, Inc. (NYSE:BRO), Omnicom Group Inc. (NYSE:OMC), and Confluent Inc. (NASDAQ:CFLT). This group of stocks’ market valuations are similar to PWR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IEX | 18 | 1047528 | -4 |
| UDR | 20 | 353763 | -4 |
| LSXMA | 44 | 1901086 | 1 |
| TXT | 31 | 1137475 | 9 |
| BRO | 31 | 1392156 | 5 |
| OMC | 25 | 396360 | -5 |
| CFLT | 27 | 1319263 | 27 |
| Average | 28 | 1078233 | 4.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1078 million. That figure was $1527 million in PWR’s case. The Liberty SiriusXM Group (NASDAQ:LSXMA) is the most popular stock in this table. On the other hand IDEX Corporation (NYSE:IEX) is the least popular one with only 18 bullish hedge fund positions. Quanta Services Inc (NYSE:PWR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PWR is 67.4. 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 positive signal but 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, PWR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PWR were disappointed as the stock returned -9.7% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.
Follow Quanta Services Inc. (NYSE:PWR)
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Disclosure: None. This article was originally published at Insider Monkey.
