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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of CMS Energy Corporation (NYSE:CMS) based on that data.
Is CMS stock a buy? CMS Energy Corporation (NYSE:CMS) shareholders have witnessed a decrease in support from the world's most elite money managers in recent months. CMS Energy Corporation (NYSE:CMS) was in 24 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 30. There were 29 hedge funds in our database with CMS holdings at the end of September. Our calculations also showed that CMS isn't among the 30 most popular stocks among hedge funds (click for Q4 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 124 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.
David Siegel of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. Now we're going to review the recent hedge fund action surrounding CMS Energy Corporation (NYSE:CMS).
Do Hedge Funds Think CMS Is A Good Stock To Buy Now?
At the end of December, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in CMS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in CMS Energy Corporation (NYSE:CMS) was held by GQG Partners, which reported holding $196.1 million worth of stock at the end of December. It was followed by Two Sigma Advisors with a $94.2 million position. Other investors bullish on the company included D E Shaw, Zimmer Partners, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Brasada Capital Management allocated the biggest weight to CMS Energy Corporation (NYSE:CMS), around 1.35% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, designating 0.96 percent of its 13F equity portfolio to CMS.
Because CMS Energy Corporation (NYSE:CMS) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there exists a select few money managers that slashed their entire stakes heading into Q1. Intriguingly, Phill Gross and Robert Atchinson's Adage Capital Management dumped the biggest position of the 750 funds watched by Insider Monkey, totaling close to $19.3 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund dropped about $4.1 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 5 funds heading into Q1.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as CMS Energy Corporation (NYSE:CMS) but similarly valued. We will take a look at China Unicom (Hong Kong) Limited (NYSE:CHU), CNH Industrial NV (NYSE:CNHI), Bio-Rad Laboratories, Inc. (NYSE:BIO), Fox Corporation (NASDAQ:FOXA), Burlington Stores Inc (NYSE:BURL), Fox Corporation (NASDAQ:FOX), and Catalent Inc (NYSE:CTLT). This group of stocks' market valuations are similar to CMS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHU,6,42062,0 CNHI,16,442785,-2 BIO,42,1117926,-6 FOXA,39,1293023,7 BURL,29,1335724,-1 FOX,17,530820,2 CTLT,35,839418,-5 Average,26.3,800251,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $800 million. That figure was $581 million in CMS's case. Bio-Rad Laboratories, Inc. (NYSE:BIO) 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 6 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 49. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately CMS wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); CMS investors were disappointed as the stock returned 5.9% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.