Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. The second half of 2015 and the first few months of this year was a stressful period for hedge funds. However, things have been taking a turn for the better in the second half of this year. Small-cap stocks which hedge funds are usually overweight outperformed the market by double digits and it may be a good time to pay attention to hedge funds’ picks before it is too late. In this article we are going to analyze the hedge fund sentiment towards Xcel Energy Inc (NYSE:XEL) .
Xcel Energy Inc (NYSE:XEL) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of September, same as at the end of June. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Ross Stores, Inc. (NASDAQ:ROST), Hilton Worldwide Holdings Inc (NYSE:HLT), and Weyerhaeuser Company (NYSE:WY) to gather more data points.
Follow Xcel Energy Inc (NYSE:XEL)
Follow Xcel Energy Inc (NYSE:XEL)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
chungking/Shutterstock.com
What does the smart money think about Xcel Energy Inc (NYSE:XEL)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the previous quarter. The graph below displays the number of hedge funds with bullish positions in XEL over the last 5 quarters, including a strong rise in the first-half of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Israel Englander’s Millennium Management has the biggest position in Xcel Energy Inc (NYSE:XEL), worth close to $153.3 million. On Millennium Management’s heels is Cliff Asness’ AQR Capital Management, with a $140.7 million position. Some other hedge funds and institutional investors that hold long positions include Jim Simons’ Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Because Xcel Energy Inc (NYSE:XEL) has encountered a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers that slashed their full holdings in the third quarter. At the top of the heap, Matthew Tewksbury’s Stevens Capital Management dropped the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at about $2.2 million in stock, and Michael Platt and William Reeves’ BlueCrest Capital Mgmt. was right behind this move, as the fund dropped about $0.6 million worth of shares.
Let’s check out hedge fund activity in other stocks similar to Xcel Energy Inc (NYSE:XEL). These stocks are Ross Stores, Inc. (NASDAQ:ROST), Hilton Worldwide Holdings Inc (NYSE:HLT), Weyerhaeuser Company (NYSE:WY), and Dollar Tree, Inc. (NASDAQ:DLTR). All of these stocks’ market caps match XEL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROST | 39 | 810769 | 4 |
| HLT | 36 | 3106197 | 9 |
| WY | 27 | 492871 | -3 |
| DLTR | 63 | 3990852 | -1 |
As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $2.10 billion. That figure was $433 million in XEL’s case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand Weyerhaeuser Company (NYSE:WY) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Xcel Energy Inc (NYSE:XEL) is even less popular than WY. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
