Were Hedge Funds Right About WEC Energy Group, Inc. (WEC)?

In this article we will check out the progression of hedge fund sentiment towards WEC Energy Group, Inc. (NYSE:WEC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

WEC Energy Group, Inc. (NYSE:WEC) investors should be aware of a decrease in hedge fund interest recently. WEC Energy Group, Inc. (NYSE:WEC) was in 17 hedge funds’ portfolios at the end of March. The all time high for this statistic is 30. Our calculations also showed that WEC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Cliff Asness of AQR Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Keeping this in mind we’re going to take a gander at the recent hedge fund action surrounding WEC Energy Group, Inc. (NYSE:WEC).

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

At first quarter’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -32% from the previous quarter. By comparison, 29 hedge funds held shares or bullish call options in WEC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, D E Shaw was the largest shareholder of WEC Energy Group, Inc. (NYSE:WEC), with a stake worth $74.4 million reported as of the end of March. Trailing D E Shaw was AQR Capital Management, which amassed a stake valued at $65.2 million. Millennium Management, Citadel Investment Group, and Holocene Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Te Ahumairangi Investment Management allocated the biggest weight to WEC Energy Group, Inc. (NYSE:WEC), around 0.35% of its 13F portfolio. Cinctive Capital Management is also relatively very bullish on the stock, earmarking 0.33 percent of its 13F equity portfolio to WEC.

Seeing as WEC Energy Group, Inc. (NYSE:WEC) has faced falling interest from the smart money, it’s easy to see that there is a sect of fund managers that decided to sell off their positions entirely in the first quarter. Intriguingly, Michael Gelband’s ExodusPoint Capital cut the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth close to $7.3 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund dumped about $4.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 8 funds in the first quarter.

Let’s go over hedge fund activity in other stocks similar to WEC Energy Group, Inc. (NYSE:WEC). We will take a look at Willis Towers Watson Public Limited Company (NASDAQ:WLTW), AMETEK, Inc. (NYSE:AME), ANSYS, Inc. (NASDAQ:ANSS), Otis Worldwide Corporation (NYSE:OTIS), Valero Energy Corporation (NYSE:VLO), Liberty Broadband Corp (NASDAQ:LBRDA), and Liberty Broadband Corp (NASDAQ:LBRDK). This group of stocks’ market caps match WEC’s market cap.

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As you can see these stocks had an average of 45.3 hedge funds with bullish positions and the average amount invested in these stocks was $2635 million. That figure was $184 million in WEC’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand Liberty Broadband Corp (NASDAQ:LBRDA) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks WEC Energy Group, Inc. (NYSE:WEC) is even less popular than LBRDA. Our overall hedge fund sentiment score for WEC is 14. 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. Hedge funds dodged a bullet by taking a bearish stance towards WEC. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd but managed to beat the market again by 10.1 percentage points. Unfortunately WEC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); WEC investors were disappointed as the stock returned 1.2% since the end of the first quarter (through 7/23) 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 since 2019.

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