We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of CMS Energy Corporation (NYSE:CMS).
CMS Energy Corporation (NYSE:CMS) shares haven't seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 30 hedge funds' portfolios at the end of December. At the end of this article we will also compare CMS to other stocks including Marvell Technology Group Ltd. (NASDAQ:MRVL), Arthur J. Gallagher & Co. (NYSE:AJG), and ArcelorMittal (NYSE:MT) to get a better sense of its popularity.
[caption id="attachment_27480" align="aligncenter" width="400"] Israel Englander of Millennium Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind let's analyze the new hedge fund action encompassing CMS Energy Corporation (NYSE:CMS).
How are hedge funds trading CMS Energy Corporation (NYSE:CMS)?
At Q4's end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CMS over the last 18 quarters. So, let's find 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 Millennium Management, which reported holding $91.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $83.8 million position. Other investors bullish on the company included ExodusPoint Capital, Two Sigma Advisors, and Luminus Management. In terms of the portfolio weights assigned to each position Shelter Harbor Advisors allocated the biggest weight to CMS Energy Corporation (NYSE:CMS), around 5.73% of its 13F portfolio. Sustainable Insight Capital Management is also relatively very bullish on the stock, designating 2.65 percent of its 13F equity portfolio to CMS.
Since CMS Energy Corporation (NYSE:CMS) has faced a decline in interest from hedge fund managers, logic holds that there were a few fund managers who sold off their full holdings heading into Q4. Interestingly, Rajiv Jain's GQG Partners dumped the biggest investment of the 750 funds monitored by Insider Monkey, totaling close to $204.4 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund dumped about $16.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to CMS Energy Corporation (NYSE:CMS). We will take a look at Marvell Technology Group Ltd. (NASDAQ:MRVL), Arthur J. Gallagher & Co. (NYSE:AJG), ArcelorMittal (NYSE:MT), and Lennar Corporation (NYSE:LEN). This group of stocks' market values are closest to CMS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRVL,29,584397,-5 AJG,31,395355,4 MT,17,353286,3 LEN,63,1861573,4 Average,35,798653,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $799 million. That figure was $526 million in CMS's case. Lennar Corporation (NYSE:LEN) is the most popular stock in this table. On the other hand ArcelorMittal (NYSE:MT) is the least popular one with only 17 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 calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on CMS as the stock returned -8.8% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.