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Entergy Corporation (ETR): Hedge Funds Are Cashing Out

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In this article we will take a look at whether hedge funds think Entergy Corporation (NYSE:ETR) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Entergy Corporation (NYSE:ETR) shareholders have witnessed a decrease in hedge fund sentiment recently. Entergy Corporation (NYSE:ETR) was in 31 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 36. There were 36 hedge funds in our database with ETR holdings at the end of December. Our calculations also showed that ETR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was 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). So you can still find a lot of gems by following hedge funds' moves today.

Stuart Zimmer Zimmer Partners
Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 check out the new hedge fund action encompassing Entergy Corporation (NYSE:ETR).

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

At first quarter's end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. On the other hand, there were a total of 34 hedge funds with a bullish position in ETR a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

The largest stake in Entergy Corporation (NYSE:ETR) was held by Citadel Investment Group, which reported holding $180.5 million worth of stock at the end of December. It was followed by Zimmer Partners with a $143 million position. Other investors bullish on the company included D E Shaw, ExodusPoint Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Zimmer Partners allocated the biggest weight to Entergy Corporation (NYSE:ETR), around 1.94% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, dishing out 1.4 percent of its 13F equity portfolio to ETR.

Because Entergy Corporation (NYSE:ETR) has witnessed bearish sentiment from the smart money, we can see that there is a sect of hedge funds that slashed their positions entirely last quarter. Interestingly, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors said goodbye to the biggest stake of the "upper crust" of funds followed by Insider Monkey, comprising close to $7.8 million in stock. Mark McMeans's fund, Brasada Capital Management, also dumped its stock, about $5.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 5 funds last quarter.

Let's go over hedge fund activity in other stocks similar to Entergy Corporation (NYSE:ETR). We will take a look at Ventas, Inc. (NYSE:VTR), Restaurant Brands International Inc (NYSE:QSR), Regions Financial Corporation (NYSE:RF), Burlington Stores Inc (NYSE:BURL), Dover Corporation (NYSE:DOV), 10x Genomics, Inc. (NASDAQ:TXG), and Discovery Inc. (NASDAQ:DISCA). This group of stocks' market values match ETR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VTR,27,231183,9 QSR,26,2253516,-13 RF,32,272499,6 BURL,32,1440740,3 DOV,26,639746,-6 TXG,23,1217339,-10 DISCA,48,590723,20 Average,30.6,949392,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.6 hedge funds with bullish positions and the average amount invested in these stocks was $949 million. That figure was $858 million in ETR's case. Discovery Inc. (NASDAQ:DISCA) is the most popular stock in this table. On the other hand 10x Genomics, Inc. (NASDAQ:TXG) is the least popular one with only 23 bullish hedge fund positions. Entergy Corporation (NYSE:ETR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ETR is 41.8. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately ETR wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ETR were disappointed as the stock returned 3.3% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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