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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Central Puerto S.A. (NYSE:CEPU).
Central Puerto S.A. (NYSE:CEPU) shareholders have witnessed a decrease in hedge fund sentiment of late. Central Puerto S.A. (NYSE:CEPU) was in 3 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 12. Our calculations also showed that CEPU isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Israel Englander of Millennium Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. 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. Keeping this in mind let's view the recent hedge fund action surrounding Central Puerto S.A. (NYSE:CEPU).
Do Hedge Funds Think CEPU Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CEPU over the last 23 quarters. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Central Puerto S.A. (NYSE:CEPU) was held by Renaissance Technologies, which reported holding $1.2 million worth of stock at the end of December. It was followed by Millennium Management with a $0.1 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.
Seeing as Central Puerto S.A. (NYSE:CEPU) has experienced falling interest from the smart money, it's safe to say that there were a few fund managers who sold off their entire stakes by the end of the first quarter. At the top of the heap, Edmond M. Safra's EMS Capital sold off the largest stake of the 750 funds tracked by Insider Monkey, worth an estimated $4.3 million in stock. James Dondero's fund, Highland Capital Management, also dropped its stock, about $1.6 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 1 funds by the end of the first quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Central Puerto S.A. (NYSE:CEPU) but similarly valued. These stocks are Vitru Limited (NASDAQ:VTRU), Viracta Therapeutics, Inc. (NASDAQ:VIRX), Nanobiotix S.A. (NASDAQ:NBTX), Misonix, Inc. (NASDAQ:MSON), Century Bancorp, Inc. (NASDAQ:CNBKA), INDUS Realty Trust, Inc. (NASDAQ:INDT), and Innate Pharma S.A. (NASDAQ:IPHA). This group of stocks' market caps are closest to CEPU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VTRU,3,8866,-3 VIRX,13,65765,8 NBTX,5,36041,-1 MSON,7,46305,-2 CNBKA,4,18875,0 INDT,8,86852,4 IPHA,2,323,1 Average,6,37575,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $1 million in CEPU's case. Viracta Therapeutics, Inc. (NASDAQ:VIRX) is the most popular stock in this table. On the other hand Innate Pharma S.A. (NASDAQ:IPHA) is the least popular one with only 2 bullish hedge fund positions. Central Puerto S.A. (NYSE:CEPU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CEPU is 16. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on CEPU as the stock returned 16.8% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.