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 821 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 March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded CenterPoint Energy, Inc. (NYSE:CNP) and determine whether the smart money was really smart about this stock.
CenterPoint Energy, Inc. (NYSE:CNP) has experienced an increase in support from the world's most elite money managers lately. CNP was in 32 hedge funds' portfolios at the end of March. There were 30 hedge funds in our database with CNP holdings at the end of the previous quarter. Our calculations also showed that CNP isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_735677" align="aligncenter" width="398"] Sander Gerber of Hudson Bay Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Now we're going to view the fresh hedge fund action regarding CenterPoint Energy, Inc. (NYSE:CNP).
What does smart money think about CenterPoint Energy, Inc. (NYSE:CNP)?
At Q1's end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in CNP a year ago. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the number one position in CenterPoint Energy, Inc. (NYSE:CNP). Citadel Investment Group has a $166.6 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $118.7 million position; 0.1% of its 13F portfolio is allocated to the stock. Other peers that are bullish consist of John Murphy's Levin Easterly Partners, Phill Gross and Robert Atchinson's Adage Capital Management and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Levin Easterly Partners allocated the biggest weight to CenterPoint Energy, Inc. (NYSE:CNP), around 4.89% of its 13F portfolio. Blackstart Capital is also relatively very bullish on the stock, setting aside 4.66 percent of its 13F equity portfolio to CNP.
As aggregate interest increased, key money managers have jumped into CenterPoint Energy, Inc. (NYSE:CNP) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in CenterPoint Energy, Inc. (NYSE:CNP). Arrowstreet Capital had $6.9 million invested in the company at the end of the quarter. David Costen Haley's HBK Investments also initiated a $4.6 million position during the quarter. The other funds with new positions in the stock are Brandon Haley's Holocene Advisors, D. E. Shaw's D E Shaw, and Sander Gerber's Hudson Bay Capital Management.
Let's go over hedge fund activity in other stocks similar to CenterPoint Energy, Inc. (NYSE:CNP). These stocks are Nordson Corporation (NASDAQ:NDSN), Erie Indemnity Company (NASDAQ:ERIE), Apollo Global Management Inc (NYSE:APO), and Globe Life Inc. (NYSE:GL). All of these stocks' market caps are similar to CNP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NDSN,22,98925,-7 ERIE,17,63002,-3 APO,34,1487468,5 GL,22,574230,-1 Average,23.75,555906,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $556 million. That figure was $561 million in CNP's case. Apollo Global Management Inc (NYSE:APO) is the most popular stock in this table. On the other hand Erie Indemnity Company (NASDAQ:ERIE) is the least popular one with only 17 bullish hedge fund positions. CenterPoint Energy, Inc. (NYSE:CNP) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on CNP, though not to the same extent, as the stock returned 21.9% during the second quarter and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.