At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of March 31. In this article, we will use that wealth of knowledge to determine whether or not Central Puerto S.A. (NYSE:CEPU) makes for a good investment right now.
Central Puerto S.A. (NYSE:CEPU) investors should be aware of an increase in hedge fund sentiment lately. CEPU was in 12 hedge funds' portfolios at the end of March. There were 8 hedge funds in our database with CEPU holdings at the end of the previous quarter. Our calculations also showed that CEPU isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
[caption id="attachment_324853" align="aligncenter" width="450"] Joshua Friedman of Canyon Capital[/caption]
Let's review the new hedge fund action surrounding Central Puerto S.A. (NYSE:CEPU).
What have hedge funds been doing with Central Puerto S.A. (NYSE:CEPU)?
Heading into the second quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the fourth quarter of 2018. By comparison, 7 hedge funds held shares or bullish call options in CEPU a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Edmond M. Safra's EMS Capital has the largest position in Central Puerto S.A. (NYSE:CEPU), worth close to $14.1 million, corresponding to 1.1% of its total 13F portfolio. Sitting at the No. 2 spot is Highland Capital Management, managed by James Dondero, which holds a $8.6 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Israel Englander's Millennium Management, Joshua Friedman and Mitchell Julis's Canyon Capital Advisors and Sander Gerber's Hudson Bay Capital Management.
As aggregate interest increased, some big names were leading the bulls' herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in Central Puerto S.A. (NYSE:CEPU). Marshall Wace LLP had $0.9 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $0.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Platt and William Reeves's BlueCrest Capital Mgmt., Robert Charles Gibbins's Autonomy Capital, and Ken Griffin's Citadel Investment Group.
Let's go over hedge fund activity in other stocks similar to Central Puerto S.A. (NYSE:CEPU). These stocks are Aimmune Therapeutics Inc (NASDAQ:AIMT), Ambarella Inc (NASDAQ:AMBA), Shutterfly, Inc. (NASDAQ:SFLY), and Suburban Propane Partners LP (NYSE:SPH). This group of stocks' market valuations are closest to CEPU's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AIMT,15,202754,-1 AMBA,19,100486,5 SFLY,28,423757,6 SPH,5,86935,0 Average,16.75,203483,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $203 million. That figure was $39 million in CEPU's case. Shutterfly, Inc. (NASDAQ:SFLY) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only 5 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. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CEPU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CEPU investors were disappointed as the stock returned -8.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.