Hedge Funds Have Never Been This Bullish On Duke Energy Corporation (DUK)

Asma UL Husna

Wed, Jun 19, 2019, 6:10 PM

Is Duke Energy Corporation (NYSE:DUK) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. 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 Duke Energy Corporation (NYSE:DUK) a first-rate investment now? Money managers are in an optimistic mood. The number of long hedge fund positions improved by 9 recently. Our calculations also showed that DUK isn't among the 30 most popular stocks among hedge funds. DUK was in 26 hedge funds' portfolios at the end of March. There were 17 hedge funds in our database with DUK positions at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_30621" align="aligncenter" width="487"]

Cliff Asness of AQR Capital Management[/caption]

Let's view the latest hedge fund action encompassing Duke Energy Corporation (NYSE:DUK).

Hedge fund activity in Duke Energy Corporation (NYSE:DUK)

Heading into the second quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 53% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DUK over the last 15 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the most valuable position in Duke Energy Corporation (NYSE:DUK). Renaissance Technologies has a $734.1 million position in the stock, comprising 0.7% of its 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $83.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors with similar optimism comprise Cliff Asness's AQR Capital Management, Israel Englander's Millennium Management and D. E. Shaw's D E Shaw.

Now, key hedge funds were leading the bulls' herd. Millennium Management, managed by Israel Englander, assembled the most valuable position in Duke Energy Corporation (NYSE:DUK). Millennium Management had $60.2 million invested in the company at the end of the quarter. Matthew Tewksbury's Stevens Capital Management also initiated a $25.1 million position during the quarter. The following funds were also among the new DUK investors: Greg Poole's Echo Street Capital Management, D. E. Shaw's D E Shaw, and Alec Litowitz and Ross Laser's Magnetar Capital.

Let's go over hedge fund activity in other stocks similar to Duke Energy Corporation (NYSE:DUK). These stocks are The Bank of Nova Scotia (NYSE:BNS), Canadian National Railway Company (NYSE:CNI), Chubb Limited (NYSE:CB), and Eni SpA (NYSE:E). This group of stocks' market values resemble DUK's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BNS,14,518832,0 CNI,17,2175473,-7 CB,23,466816,-1 E,9,99142,2 Average,15.75,815066,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $815 million. That figure was $1114 million in DUK's case. Chubb Limited (NYSE:CB) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Duke Energy Corporation (NYSE:DUK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately DUK wasn't nearly as popular as these 20 stocks and hedge funds that were betting on DUK were disappointed as the stock returned -3.9% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.

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

Related Content