As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Xcel Energy Inc (NYSE:XEL).
Xcel Energy Inc (NYSE:XEL) was in 18 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 28. XEL has seen a decrease in hedge fund interest recently. There were 28 hedge funds in our database with XEL holdings at the end of December. Our calculations also showed that XEL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Bruce Kovner of Caxton Associates LP
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 fresh hedge fund action encompassing Xcel Energy Inc (NYSE:XEL).
Do Hedge Funds Think XEL Is A Good Stock To Buy Now?
At the end of March, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -36% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in XEL over the last 23 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Xcel Energy Inc (NYSE:XEL), which was worth $51 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $48 million worth of shares. D E Shaw, Millennium Management, and Point72 Asset Management 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 0 allocated the biggest weight to Xcel Energy Inc (NYSE:XEL), around 0.44% of its 13F portfolio. 0 is also relatively very bullish on the stock, earmarking 0.08 percent of its 13F equity portfolio to XEL.
Because Xcel Energy Inc (NYSE:XEL) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of money managers that slashed their full holdings last quarter. Interestingly, Renaissance Technologies cut the largest stake of all the hedgies watched by Insider Monkey, worth an estimated $18.9 million in stock, and Matthew Davis’s Coann Capital was right behind this move, as the fund sold off about $9.1 million worth. These moves are interesting, as total hedge fund interest was cut by 10 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Xcel Energy Inc (NYSE:XEL). These stocks are Lufax Holding Ltd (NYSE:LU), Phillips 66 (NYSE:PSX), PPG Industries, Inc. (NYSE:PPG), Alcon Inc. (NYSE:ALC), O’Reilly Automotive Inc (NASDAQ:ORLY), Paychex, Inc. (NASDAQ:PAYX), and Barrick Gold Corporation (NYSE:GOLD). All of these stocks’ market caps are similar to XEL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LU | 9 | 208197 | -2 |
| PSX | 24 | 290593 | -2 |
| PPG | 25 | 173679 | -9 |
| ALC | 23 | 753974 | -1 |
| ORLY | 45 | 2704943 | -4 |
| PAYX | 25 | 872105 | -7 |
| GOLD | 49 | 1305890 | -4 |
| Average | 28.6 | 901340 | -4.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $901 million. That figure was $200 million in XEL’s case. Barrick Gold Corporation (NYSE:GOLD) is the most popular stock in this table. On the other hand Lufax Holding Ltd (NYSE:LU) is the least popular one with only 9 bullish hedge fund positions. Xcel Energy Inc (NYSE:XEL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for XEL is 25.5. 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 negative signal and 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 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately XEL wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); XEL investors were disappointed as the stock returned 3.3% since the end of March (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 in 2021.
Follow Xcel Energy Inc (NYSE:XEL)
Follow Xcel Energy Inc (NYSE:XEL)
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Disclosure: None. This article was originally published at Insider Monkey.
