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Is CenterPoint Energy, Inc. (CNP) Going to Burn These Hedge Funds?

·5 min read

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about CenterPoint Energy, Inc. (NYSE:CNP) in this article.

CenterPoint Energy, Inc. (NYSE:CNP) investors should pay attention to a decrease in activity from the world's largest hedge funds in recent months. CenterPoint Energy, Inc. (NYSE:CNP) was in 25 hedge funds' portfolios at the end of March. The all time high for this statistic is 38. Our calculations also showed that CNP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Robert Atchinson of Adage Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let's take a glance at the fresh hedge fund action regarding CenterPoint Energy, Inc. (NYSE:CNP).

Do Hedge Funds Think CNP Is A Good Stock To Buy Now?

At the end of March, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the fourth quarter of 2020. By comparison, 32 hedge funds held shares or bullish call options in CNP a year ago. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in CenterPoint Energy, Inc. (NYSE:CNP) was held by Citadel Investment Group, which reported holding $115.4 million worth of stock at the end of December. It was followed by Adage Capital Management with a $73.9 million position. Other investors bullish on the company included Millennium Management, Levin Easterly Partners, and ExodusPoint Capital. In terms of the portfolio weights assigned to each position Coann Capital allocated the biggest weight to CenterPoint Energy, Inc. (NYSE:CNP), around 9.61% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, earmarking 3.79 percent of its 13F equity portfolio to CNP.

Judging by the fact that CenterPoint Energy, Inc. (NYSE:CNP) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of fund managers that elected to cut their positions entirely last quarter. Intriguingly, Bruce Kovner's Caxton Associates LP dropped the largest stake of all the hedgies monitored by Insider Monkey, comprising about $8.7 million in stock. Steve Pattyn's fund, Yaupon Capital, also dropped its stock, about $7.7 million worth. These moves are important to note, as total hedge fund interest dropped by 5 funds last quarter.

Let's go over hedge fund activity in other stocks similar to CenterPoint Energy, Inc. (NYSE:CNP). We will take a look at Shaw Communications Inc (NYSE:SJR), Nuance Communications Inc. (NASDAQ:NUAN), W.P. Carey Inc. (NYSE:WPC), NortonLifeLock Inc. (NASDAQ:NLOK), Ceridian HCM Holding Inc. (NYSE:CDAY), Medical Properties Trust, Inc. (NYSE:MPW), and Texas Pacific Land Corporation (NYSE:TPL). This group of stocks' market caps are closest to CNP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SJR,21,384820,2 NUAN,57,4129595,-3 WPC,23,162726,5 NLOK,32,1028034,3 CDAY,28,1097868,2 MPW,23,271470,7 TPL,17,2556654,6 Average,28.7,1375881,3.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.7 hedge funds with bullish positions and the average amount invested in these stocks was $1376 million. That figure was $371 million in CNP's case. Nuance Communications Inc. (NASDAQ:NUAN) is the most popular stock in this table. On the other hand Texas Pacific Land Corporation (NYSE:TPL) is the least popular one with only 17 bullish hedge fund positions. CenterPoint Energy, Inc. (NYSE:CNP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CNP is 29.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market by 6.7 percentage points. A small number of hedge funds were also right about betting on CNP, though not to the same extent, as the stock returned 13.2% since the end of Q1 (through July 9th) and outperformed the market.

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