We recently compiled a list of the 191.50% in 3 Years: Peconic Hedge Fund’s Top 10 Stock Picks. In this article, we are going to take a look at where Quanta Services, Inc. (NYSE:PWR) stands against the other stocks.
Established in 1997, Peconic Partners is a hedge fund manager based in New York, under the leadership of William Harnisch. The firm manages both its capital and that of its clients, using long/short equity hedge fund strategies. It also follows a thematic investment approach with a structured and consistent methodology, aiming to achieve positive returns over the long term regardless of market conditions.
Peconic Partners’s stock selection approach is driven by its deep experience. The Peconic Partners investment strategy has a history spanning over 40 years, originating with its predecessor firm. Peconic Partners’ long-term track record, history of capital appreciation, and past ability to generate alpha are testaments to the vision, insight, and patience derived from their experience.
William Harnisch is the Chief Investment Strategist at Peconic Partners. He managed Peconic Partners from the late 1970s until 1997 when the long-only business was sold to a privately-held financial services firm aiming to expand its asset management business. However, William Harnisch and his partners retained exclusive ownership of the hedge business. In December 2004, he and the current Peconic team formed Peconic Partners, continuing the successful and disciplined hedge fund strategy practiced since the late 1970s.
Mr. Harnisch’s career began in 1968 at Chase Manhattan Bank. He later joined Forstmann-Leff Associates (FLA), managing assets exceeding $5 billion and entering the hedge fund business in 1986. In 1997, he sold FLA’s long-only business and in 2004, he founded Peconic Partners to concentrate on hedged products. William Harnisch holds a B.B.A. from Baruch College and is a Chartered Financial Analyst. He is active in philanthropy through the William F. Harnisch Foundation and is a board member of the Baruch College Fund. His market insights have been featured in the Wall Street Journal and Barron’s.
In 2023, Peconic Partners LLC regained the top spot on HedgeFollow’s Top 20 Best Performing Hedge Funds list. Despite challenges like rising inflation and market volatility, Peconic Partners delivered a remarkable 191.50% performance over three years. This achievement is significant as many money managers struggled during a surprising market rally. While only 38% of large-cap mutual funds beat the market in 2023, and long-short hedge funds saw minimal gains, Peconic Partners excelled. For the fourth year in a row, the New York-based fund achieved an annual gain of 38%, three times higher than the S&P 500’s performance.
In late December of 2023, Mr. Harnisch increased bets against the SPDR S&P 500 ETF Trust and took short positions in expensive industrial stocks and consumer-product makers that have raised prices aggressively. This caused the fund’s net leverage to decrease from 50% to 33% in a few weeks, and it has continued to drop in early 2024.
Our Methodology
The companies mentioned in this article come from Peconic Hedge Fund’s top 10 stock picks at the end of the first quarter of 2024. To give readers a thorough understanding of these companies, we’ve included analyst ratings and other relevant details. We also mention the number of hedge fund investors in each company. Why focus on the stocks that hedge funds invest in? Our research shows that mimicking the top picks of the best hedge funds can lead to market-beating returns. Our quarterly newsletter’s strategy, which selects 14 small-cap and large-cap stocks each quarter, has returned 275% since May 2014, outperforming its benchmark by 150 percentage points. (see more details here)
A team of electricians climbing an industrial wiring structure, the complexity of the project revealed in the background.
Quanta Services, Inc. (NYSE:PWR)
Number of Hedge Fund Holders: 56
Topping Peconic Hedge Fund’s top 10 stock picks is Quanta Services, Inc. (NYSE:PWR). Quanta Services, Inc. (NYSE:PWR) works in the energy and telecommunications sectors, which are seeing high demand due to investments in renewable energy, infrastructure upgrades, and expanding networks. Quanta Services Inc. (NYSE: PWR) has recently acquired Cupertino Electric for around $1.54 billion. This includes $1.3 billion in cash and 883,000 Quanta shares worth about $225 million, with an additional potential payment of up to $200 million based on performance targets. The acquisition is expected to immediately enhance Quanta Services, Inc. (NYSE:PWR)’s growth, cash flow, and earnings per share, contributing an estimated $175-$195 million to adjusted core profit and $0.40-$0.50 to adjusted diluted EPS for FY25.
Regulatory filings reveal that by the end of the first quarter of 2024, Peconic Partners owned 5,598,565 shares of Quanta Services, Inc. (NYSE:PWR), valued at $1,454,507,187, making up a significant portion of their portfolio at 64.58%. Guiding Mast Investments’ analyst, George Fisher, recommends buying Quanta Services, Inc. (NYSE:PWR) with a caveat. He notes that Quanta Services, Inc. (NYSE:PWR) has a high valuation, and its earnings per share (EPS) growth must sustain a 17% rate over the next few years.
Artisan Mid Cap Fund stated the following regarding Quanta Services, Inc. (NYSE:PWR) in its fourth quarter 2023 investor letter:
“Along with DexCom, Inc. (NASDAQ:DXCM), notable adds in the quarter included Quanta Services, Inc. (NYSE:PWR) and Jabil Inc. (NYSE:JBL). Quanta provides outsourced skilled labor for maintenance and construction services, primarily to utilities. We have followed the company for over a decade and have witnessed its shift from oil and gas to renewables. The energy transition (solar and wind farms, electric vehicles, etc.) requires investments in the US energy grid to support greater electrification. At the same time, climate change is increasing stress on the existing grid, forcing utilities to increase maintenance spending. Furthermore, Federal incentive programs, such as the Inflation Reduction Act and Bipartisan Infrastructure Act, will help fuel Quanta’s long-term growth given its expertise in transmission and distribution connections as renewable energy infrastructure seeks to connect to the grid. The stock sold off early in the quarter on concerns that higher interest rates would lead to a pullback in renewables investments by utility customers. However, based on our industry research, we think Quanta’s key customers are well resourced and committed to meeting long-term electrification needs via infrastructure investment. We used the selloff as an opportunity to move the position into the CropSM at a more attractive valuation.”
Overall PWR ranks 1st on our list of Peconic Partners’ top 10 stock picks. You can visit 191.50% in 3 Years: Peconic Hedge Fund’s Top 10 Stock Picks to see the other stocks that are on hedge funds’ radar. While we recognize PWR’s potential as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PWR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.