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Hedge Funds Nibbling On Central Puerto S.A. (CEPU)

Debasis Saha

In this article we will take a look at whether hedge funds think Central Puerto S.A. (NYSE:CEPU) 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.

Is Central Puerto S.A. (NYSE:CEPU) an excellent investment today? The smart money is buying. The number of bullish hedge fund bets improved by 1 in recent months. Our calculations also showed that CEPU 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). CEPU was in 6 hedge funds' portfolios at the end of the first quarter of 2020. There were 5 hedge funds in our database with CEPU holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_758454" align="aligncenter" width="400"] James Dondero of Highland Capital Management[/caption]

James Dondero Highland Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's view the key hedge fund action surrounding Central Puerto S.A. (NYSE:CEPU).

What does smart money think about Central Puerto S.A. (NYSE:CEPU)?

Heading into the second quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CEPU over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CEPU A Good Stock To Buy?

Among these funds, EMS Capital held the most valuable stake in Central Puerto S.A. (NYSE:CEPU), which was worth $3.6 million at the end of the third quarter. On the second spot was Highland Capital Management which amassed $1.3 million worth of shares. Paloma Partners, LMR Partners, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position EMS Capital allocated the biggest weight to Central Puerto S.A. (NYSE:CEPU), around 0.37% of its 13F portfolio. Highland Capital Management is also relatively very bullish on the stock, dishing out 0.25 percent of its 13F equity portfolio to CEPU.

As aggregate interest increased, key money managers have jumped into Central Puerto S.A. (NYSE:CEPU) headfirst. Renaissance Technologies,  created the largest position in Central Puerto S.A. (NYSE:CEPU). Renaissance Technologies had $0.1 million invested in the company at the end of the quarter.

Let's also examine hedge fund activity in other stocks similar to Central Puerto S.A. (NYSE:CEPU). These stocks are Viking Therapeutics, Inc. (NASDAQ:VKTX), Tutor Perini Corp (NYSE:TPC), MidWestOne Financial Group, Inc. (NASDAQ:MOFG), and Chesapeake Energy Corporation (NYSE:CHK). This group of stocks' market values are similar to CEPU's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VKTX,17,24942,3 TPC,10,12342,-5 MOFG,9,10690,2 CHK,15,12034,-4 Average,12.75,15002,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $5 million in CEPU's case. Viking Therapeutics, Inc. (NASDAQ:VKTX) is the most popular stock in this table. On the other hand MidWestOne Financial Group, Inc. (NASDAQ:MOFG) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Central Puerto S.A. (NYSE:CEPU) is even less popular than MOFG. Hedge funds clearly dropped the ball on CEPU as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on CEPU as the stock returned 28% so far in the second quarter and outperformed the market by an even larger margin.

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

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