The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded CMS Energy Corporation (NYSE:CMS) and determine whether the smart money was really smart about this stock.
CMS Energy Corporation (NYSE:CMS) investors should pay attention to an increase in hedge fund interest of late. CMS Energy Corporation (NYSE:CMS) was in 30 hedge funds' portfolios at the end of June. The all time high for this statistics is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CMS isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Bruce Kovner of Caxton Associates LP
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we're going to analyze the key hedge fund action encompassing CMS Energy Corporation (NYSE:CMS).
Hedge fund activity in CMS Energy Corporation (NYSE:CMS)
At Q2's end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CMS over the last 20 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, GQG Partners, managed by Rajiv Jain, holds the biggest position in CMS Energy Corporation (NYSE:CMS). GQG Partners has a $178.2 million position in the stock, comprising 0.8% of its 13F portfolio. On GQG Partners's heels is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $72.6 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions comprise D. E. Shaw's D E Shaw, Israel Englander's Millennium Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Blackstart Capital allocated the biggest weight to CMS Energy Corporation (NYSE:CMS), around 4.16% of its 13F portfolio. Brasada Capital Management is also relatively very bullish on the stock, earmarking 1.5 percent of its 13F equity portfolio to CMS.
As aggregate interest increased, specific money managers were breaking ground themselves. Echo Street Capital Management, managed by Greg Poole, assembled the biggest position in CMS Energy Corporation (NYSE:CMS). Echo Street Capital Management had $24.1 million invested in the company at the end of the quarter. Bruce Kovner's Caxton Associates LP also initiated a $10.5 million position during the quarter. The other funds with new positions in the stock are Brian Olson, Baehyun Sung, and Jamie Waters's Blackstart Capital, Jonathan Soros's JS Capital, and Dmitry Balyasny's Balyasny Asset Management.
Let's go over hedge fund activity in other stocks similar to CMS Energy Corporation (NYSE:CMS). These stocks are West Pharmaceutical Services Inc. (NYSE:WST), Smith & Nephew plc (NYSE:SNN), China Unicom (Hong Kong) Limited (NYSE:CHU), CDW Corporation (NASDAQ:CDW), TransUnion (NYSE:TRU), Northern Trust Corporation (NASDAQ:NTRS), and Restaurant Brands International Inc (NYSE:QSR). All of these stocks' market caps are similar to CMS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WST,27,379097,0 SNN,12,90551,3 CHU,8,42706,2 CDW,40,1179993,4 TRU,47,1628502,3 NTRS,35,449745,8 QSR,44,2868475,3 Average,30.4,948438,3.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $948 million. That figure was $501 million in CMS's case. TransUnion (NYSE:TRU) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) is the least popular one with only 8 bullish hedge fund positions. CMS Energy Corporation (NYSE:CMS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CMS is 65.2. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and surpassed the market by 17.6 percentage points. Unfortunately CMS wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CMS investors were disappointed as the stock returned 5.8% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.