BALTIMORE (Stockpickr) -- If you want to think like the "smart money," you've got to get boring. No, I'm not criticizing how hedge fund managers spend their weekends. Instead, it's all about what they're doing with their portfolios in 2014.
For instance, hedge funds piled into utility stocks in a big way last quarter, making it one of just four sectors that saw net buying from professional investors during the quarter. Normally, utilities fall in the category of "widow and orphan stocks" -- they're the staid dividend-paying names that don't pack many surprises. But in the context of 2014's flight to yield, they've been delivering anything-but-boring performance.
Since the calendar flipped to January, the average utility stock has delivered nearly 8% gains. That's double what the S&P 500 has paid you -- and that's not counting dividends.
But we're not talking about the average utility stock today. Instead, we're focusing on the five utility names that hedge fund managers love the most. To figure those out, we've got to take a closer look at 13F filings.
Institutional investors with more than $100 million in assets are required to file a 13F -- a form that breaks down their stock positions for public consumption. From hedge funds to mutual funds to insurance companies, any professional investors who manage more than that $100 million watermark are required to file a 13F.
In total, approximately 3,700 firms file 13F forms each quarter, and by comparing one quarter's filing with another, we can see how any single fund manager is moving their portfolio around. While the data is generally delayed by about a quarter, that's not necessarily a bad thing -- research shows that applying a lag to institutional holdings can generate positive alpha in some cases. That's all the more reason to crack open the moves being made with pro investors' $19.6 trillion under management.
Today, we'll focus on hedge funds' five favorite utility stocks.