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Hedge Funds Have Never Been This Bullish On Entergy Corporation (ETR)

Nina Todic

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space.

Entergy Corporation (NYSE:ETR) investors should be aware of an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that etr isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross, Adage Capital Management

We're going to take a peek at the new hedge fund action encompassing Entergy Corporation (NYSE:ETR).

What does the smart money think about Entergy Corporation (NYSE:ETR)?

At Q1's end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in ETR a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with ETR Positions

The largest stake in Entergy Corporation (NYSE:ETR) was held by Renaissance Technologies, which reported holding $407.8 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $197.3 million position. Other investors bullish on the company included Adage Capital Management, Luminus Management, and Millennium Management.

As one would reasonably expect, specific money managers were leading the bulls' herd. Stevens Capital Management, managed by Matthew Tewksbury, created the largest position in Entergy Corporation (NYSE:ETR). Stevens Capital Management had $1.5 million invested in the company at the end of the quarter. Roger Ibbotson's Zebra Capital Management also initiated a $1.1 million position during the quarter. The following funds were also among the new ETR investors: Paul Tudor Jones's Tudor Investment Corp and David Harding's Winton Capital Management.

Let's go over hedge fund activity in other stocks similar to Entergy Corporation (NYSE:ETR). We will take a look at Ameren Corporation (NYSE:AEE), Waters Corporation (NYSE:WAT), Liberty Global Plc (NASDAQ:LBTYK), and Mettler-Toledo International Inc. (NYSE:MTD). This group of stocks' market caps are similar to ETR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AEE,21,739961,-2 WAT,30,689161,-2 LBTYK,33,3302492,1 MTD,18,221886,-4 Average,25.5,1238375,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $1238 million. That figure was $1470 million in ETR's case. Liberty Global Plc (NASDAQ:LBTYK) is the most popular stock in this table. On the other hand Mettler-Toledo International Inc. (NYSE:MTD) is the least popular one with only 18 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 calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on ETR, though not to the same extent, as the stock returned 1.5% during the same time frame and outperformed the market as well.

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

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