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Hedge Funds Are Selling CMS Energy Corporation (CMS)

Debasis Saha

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about CMS Energy Corporation (NYSE:CMS)?

CMS Energy Corporation (NYSE:CMS) has seen a decrease in activity from the world's largest hedge funds of late. Our calculations also showed that CMS 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). 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.

Rajiv Jain of GQG Partners

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 trades like this one as well as this tiny lithium play. 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. With all of this in mind we're going to take a glance at the latest hedge fund action surrounding CMS Energy Corporation (NYSE:CMS).

What have hedge funds been doing with CMS Energy Corporation (NYSE:CMS)?

At Q1's end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in CMS a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Is CMS A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the largest position in CMS Energy Corporation (NYSE:CMS). Renaissance Technologies has a $103.3 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Rajiv Jain of GQG Partners, with a $87.1 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism include John Overdeck and David Siegel's Two Sigma Advisors, D. E. Shaw's D E Shaw and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Luminus Management allocated the biggest weight to CMS Energy Corporation (NYSE:CMS), around 1.94% of its 13F portfolio. Brasada Capital Management is also relatively very bullish on the stock, earmarking 1.9 percent of its 13F equity portfolio to CMS.

Seeing as CMS Energy Corporation (NYSE:CMS) has faced declining sentiment from hedge fund managers, it's easy to see that there is a sect of fund managers that elected to cut their entire stakes by the end of the first quarter. It's worth mentioning that Peter J. Hark's Shelter Harbor Advisors cut the biggest stake of the 750 funds tracked by Insider Monkey, worth close to $11 million in stock. Greg Poole's fund, Echo Street Capital Management, also sold off its stock, about $9.3 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds by the end of the first quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as CMS Energy Corporation (NYSE:CMS) but similarly valued. These stocks are Parker-Hannifin Corporation (NYSE:PH), DocuSign, Inc. (NASDAQ:DOCU), Mettler-Toledo International Inc. (NYSE:MTD), and LyondellBasell Industries NV (NYSE:LYB). This group of stocks' market values are similar to CMS's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PH,32,889095,-7 DOCU,47,1082768,14 MTD,31,616788,2 LYB,35,474610,-5 Average,36.25,765815,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $766 million. That figure was $421 million in CMS's case. DocuSign, Inc. (NASDAQ:DOCU) 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 31 bullish hedge fund positions. Compared to these stocks CMS Energy Corporation (NYSE:CMS) is even less popular than MTD. Hedge funds dodged a bullet by taking a bearish stance towards CMS. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately CMS wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); CMS investors were disappointed as the stock returned 0.5% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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

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