Were These Hedge Funds Right About Selling Dominion Energy Inc. (D)?

In this article you are going to find out whether hedge funds think Dominion Energy Inc. (NYSE:D) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Dominion Energy Inc. (NYSE:D) the right pick for your portfolio? Money managers were in a bearish mood. The number of long hedge fund positions were trimmed by 1 lately. Dominion Energy Inc. (NYSE:D) was in 33 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 45. Our calculations also showed that D isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are many formulas investors have at their disposal to assess stocks. A couple of the most underrated formulas are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce the market by a significant amount (see the details here).

Phillip Gross of Adage Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a look at the latest hedge fund action regarding Dominion Energy Inc. (NYSE:D).

How have hedgies been trading Dominion Energy Inc. (NYSE:D)?

At second quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards D over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Among these funds, D E Shaw held the most valuable stake in Dominion Energy Inc. (NYSE:D), which was worth $83.8 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $80.6 million worth of shares. Adage Capital Management, Citadel Investment Group, and Renaissance Technologies 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 Ecofin Ltd allocated the biggest weight to Dominion Energy Inc. (NYSE:D), around 2.66% of its 13F portfolio. Beech Hill Partners is also relatively very bullish on the stock, dishing out 1.15 percent of its 13F equity portfolio to D.

Judging by the fact that Dominion Energy Inc. (NYSE:D) has faced declining sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedgies that decided to sell off their positions entirely in the second quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group dropped the biggest investment of the 750 funds tracked by Insider Monkey, totaling about $29.9 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also cut its stock, about $2.4 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds in the second quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Dominion Energy Inc. (NYSE:D) but similarly valued. These stocks are The Goldman Sachs Group, Inc. (NYSE:GS), The Estee Lauder Companies Inc (NYSE:EL), The Blackstone Group Inc. (NYSE:BX), Stryker Corporation (NYSE:SYK), Intuitive Surgical, Inc. (NASDAQ:ISRG), Anthem Inc (NYSE:ANTM), and Fiserv, Inc. (NASDAQ:FISV). This group of stocks’ market values resemble D’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 58.4 hedge funds with bullish positions and the average amount invested in these stocks was $2468 million. That figure was $366 million in D’s case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Intuitive Surgical, Inc. (NASDAQ:ISRG) is the least popular one with only 43 bullish hedge fund positions. Compared to these stocks Dominion Energy Inc. (NYSE:D) is even less popular than ISRG. Our overall hedge fund sentiment score for D is 26. 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 D. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th but managed to beat the market again by 20.1 percentage points. Unfortunately D wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); D investors were disappointed as the stock returned 0.1% since the end of the second quarter (through 10/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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