FirstEnergy Corp. (NYSE:FE), Chevron Corporation (NYSE:CVX), and Phillips 66 (NYSE:PSX) are three of the top Citadel stock holdings in the energy space among the fund’s non-options based holdings.
Ken Griffin’s Citadel Investment Group is one of the 15 Biggest Hedge Funds in the World by AUM, with assets under management of more than $50 billion heading into 2023. The multi-strategy fund was in the midst of one of its best and most profitable years ever through November, with its flagship fund having gained 32% despite the market turmoil.
With Citadel’s stock holdings performing so well, the fund planned to return $7 billion in profits to its clients early in 2023. The firm returned a total of $11 billion in profits to clients between 2017 and 2021. Citadel was already the second-most profitable hedge fund manager of all time as of 2021 according to LCH Investments, trailing only Ray Dalio’s Bridgewater Associates, which also got off a very strong start in 2022 but faltered in the second-half of the year.
Citadel has its hands in all aspects of the financial arena, including credit, fixed income, macro, and commodities, which has helped it capitalize on various opportunities over the years. But Citadel’s stock holdings have been the multi-strategy fund’s bread and butter, having enjoyed a remarkable run of success dating back to just after the financial crisis, having gained at least 11% every year since suffering a devastating 54% loss during the crisis.
Due to the fund’s heavy focus on options trading, its 13F portfolio value actually dwarfs its AUM in size, checking in at $439 billion at the end of September, up from $390 billion a quarter earlier. Given its gigantic portfolio, which contains tens of thousands of holdings, the Citadel’s exposure to various sectors changed very little quarter to quarter or even year to year.
Citadel has traditionally had more exposure to the finance, healthcare, tech, and consumer discretionary sectors than any other, while also having noteworthy holdings in energy, consumer staples, industrial, and communications stocks. In this article we’ll take a look at Citadel’s biggest stock holdings in the energy space as of September 30.
Citadel Stock Holdings: 10 Biggest Energy Stocks
Ken Griffin of Citadel Investment Group
Our Methodology
The following Citadel stock holdings data is gathered from Citadel Investment Group’s latest 13F filing with the SEC. As we don’t typically cover options positions, we have scoured deep into Citadel’s portfolio to uncover the fund’s ten biggest non-options-based energy holdings.
We follow hedge funds like Citadel Investment Group because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns. All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q3 2022 reporting period.
Value of Citadel Investment Group’s13F Position: $110 million
Number of Hedge Fund Shareholders: 45
Phillips 66 (NYSE:PSX), FirstEnergy Corp. (NYSE:FE), and Chevron Corporation (NYSE:CVX) rank near the top of the list of Citadel stock holdings in terms of biggest energy stocks. Just grabbing a spot inside the top ten is First Solar, Inc. (NASDAQ:FSLR), which was one of the top performing stocks of 2022, gaining 69%. Citadel trimmed its long position in First Solar by 6% during Q3 to 831,771 shares and also has large positions of both put and call options on the stock.
First Solar, Inc. (NASDAQ:FSLR) is one of the 5 Best Solar Energy Stocks to Invest In Heading into 2023 as evidenced by the huge influx of smart money into the stock during Q3. There was a 73% jump in hedge fund ownership of the stock during the quarter, which included Jim Simons’ Renaissance Technologies and Zach Schreiber’s Point State Capital adding FSLR to their 13F portfolios.
There has been a great deal of euphoria around solar stocks like First Solar, Inc. (NASDAQ:FSLR) this year given the passage of the Inflation Reduction Act, which aims to pour billions of dollars into climate change-focused initiatives. However, First Solar’s performance has been criticized by some analysts this year, as the company failed to generate positive free cash flow despite the most favorable pricing environment for solar modules in more than a decade.
Value of Citadel Investment Group’s13F Position: $130 million
Number of Hedge Fund Shareholders: 43
Exelon Corporation (NASDAQ:EXC) is one of the top Citadel stock holdings, jumping into the top ten biggest energy holdings of Ken Griffin’s fund after it raised its stake in the company by 1,562% during Q3 to over 3.47 million shares. Hedge fund ownership of EXC took a big drop during Q1 and stayed flat during Q2, but rebounded during Q3, rising by 26%. Rajiv Jain’s GQG Partners owns by far the largest Exelon stake as of September 30, holding nearly 21.4 million shares.
Exelon Corporation (NASDAQ:EXC), a utility services holding company with more than 10 million customers, is in the midst of implementing substantial improvements to its infrastructure in an effort to boost its reliability, investing $6.9 billion on the initiatives. The company projects to grow EPS by 6% to 8% over the next three years.
While Exelon was hit with a wave of price target downgrades from analysts in November, they by and large remain bullish on the company’s operational performance, growth opportunities, and low-risk profile. The recent leadership turnovers, including the appointment of both a new COO and CFO, as well as adjustments for seasonality, influenced some of the downgrades.
The ClearBridge Investments Global Infrastructure Value Strategy believes Exelon Corporation (NASDAQ:EXC) is now being seen as a more premium player in the utilities space, as it discussed in its Q1 2022 investor letter:
“U.S. electric utility Exelon (NASDAQ:EXC) was also a top contributor. Exelon is a pure transmission and distribution regulated utility business serving millions of electric and gas customers across Delaware, Illinois, Maryland, New Jersey, Pennsylvania and the District of Columbia. Shares outperformed along with the utilities sector; Exelon is also starting to be viewed as a premium name after its recently completed spin-off of power generation business Constellation Energy (NASDAQ:CEG).”
Value of Citadel Investment Group’s13F Position: $135 million
Number of Hedge Fund Shareholders: 27
Citadel now owns the biggest stake in Consolidated Edison, Inc. (NYSE:ED) among the select group of funds tracked by Insider Monkey’s database after raising its stake in the company by 290% during Q3 to 1.57 million shares. Former top shareholder AQR Capital raised its ED position by a modest 6% during the quarter to end September with 1.44 million shares.
One of the 5 Best Dividend Stocks of All Time, Consolidated Edison, Inc. (NYSE:ED) is approaching the rarified air of Dividend King status, having raised its annual dividend payouts for 48 straight years. The company’s dividend history stretches back much farther than that, all the way to the 19th century in fact, as it’s been making payouts since 1885. Its shares currently yield 3.32%.
Consolidated Edison, Inc. (NYSE:ED) recently announced that it will sell off its green energy business for $6.8 billion in a move that will allow it to pay down some of its debt and begin buying back more of its shares. It will also spare the company from having to invest in the growth initiatives for that business, which may have required it to take on more debt or issue more equity. The company instead plans to focus on investing in regulated utilities.
Value of Citadel Investment Group’s13F Position: $135 million
Number of Hedge Fund Shareholders: 51
Citadel powered up its Southwestern Energy Company (NYSE:SWN) position something fierce during Q3, raising it by 3,330% to over 22 million shares. Hedge fund ownership of SWN sank to an all-time low at the end of 2019 but has rebounded in a big way this year, nearly doubling during the first three quarters of 2022.
Southwestern Energy Company (NYSE:SWN) is one of the top natural gas producers in the U.S., with prime acreage at two of the most prominent shale gas basins in the country. Citi analyst Paul Diamond cited fundamental concerns with those basins in a recent report however, in which he downgraded SWN to ‘Neutral’ from ‘Buy’ with a $6.50 price target.
Those concerns appear to have been somewhat warranted as a record decline in supplies from the Appalachian Basin during the winter storm that swept much of the country in late December put tremendous strain on the power grid. Well freeze offs and mechanical issues were some of the reasons behind the 27% decline in production that was estimated by BloombergNEF.
Greenlight Capital calculated Southwestern Energy Company (NYSE:SWN)’s PV-104 value at $13.83 per share in its Q1 2022 investor letter, more than double what shares currently trade hands for:
“SWN is the second largest producer of natural gas in the U.S. The company is well-situated to satisfy growing domestic and export demand. Over the short, medium and long term, Europe now intends to reduce its reliance on Russian energy and increase its use of U.S. LNG. Based on its 2021 year-end reserves – which assumed a $3.60/MMBtu long-term natural gas price – SWN has a PV-104 value of $13.83 per share. By the end of the first quarter, the U.S. natural gas 5-year forward curve averaged $4.28/MMBtu, while international seaborne LNG was close to $20/MMBtu. Over the intermediate term, with the benefit of substantial global investment in infrastructure, we expect prices for U.S. and international natural gas to converge. We acquired our shares at an average price of $6.58. SWN shares ended the quarter at $7.17.”
Value of Citadel Investment Group’s13F Position: $147 million
Number of Hedge Fund Shareholders: 46
Closing out the first half of the list of Citadel’s biggest energy stock holdings is Vistra Corp. (NYSE:VST), which the fund raised its stake in by 6% during Q3, lifting its share count to 6.99 million. Howard Marks’ Oaktree Capital has owned the largest stake in VST dating back to the second half of 2018, though its 13F exposure to the stock of 5.85% is about half what it was in 2018.
Vistra Corp. (NYSE:VST) plans to fully capitalize on the Inflation Reduction Act, with the goal of eventually retiring its coal plants and investing heavily in solar and battery power in the coming years and decades. It is guiding to retire 8,000 MW of fossil-fuel powered plants by 2027, to be replaced in part by 1,213 MW of battery storage by 2026. Longer-term, the company aims to achieve net-zero emissions by 2050.
The Legacy Ridge Capital Partners Equity Fund believes Vistra Corp. (NYSE:VST)’s discount to intrinsic value is more attractive than ever, as it laid out in its Q2 2022 investor letter:
“We had a hard time deciding which company we should discuss in this letter. By just about every metric, all our holdings are cheap from both a relative and absolute perspective – especially compared to the performance of commodity prices and the recent pullback in the overall complex of energy stocks. For the first six months of 2022, oil was up 41%, natural gas up 45%, natural gas liquids up 34%, and the futures curve for electricity (in the two biggest deregulated power markets) is up ~30%, but our holdings were only up a measly ~1% by mid-year! The point is all our positions are investment stories worth telling.
Click the link below to see where Chevron Corporation (NYSE:CVX), Phillips 66 (NYSE:PSX), and FirstEnergy Corp. (NYSE:FE) rank among Citadel’s top energy stock picks as we head into 2023.
