Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards CenterPoint Energy, Inc. (NYSE:CNP).
Is CenterPoint Energy, Inc. (NYSE:CNP) worth your attention right now? Investors who are in the know are in a pessimistic mood. The number of bullish hedge fund positions went down by 1 lately. Our calculations also showed that CNP isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). CNP was in 30 hedge funds' portfolios at the end of December. There were 31 hedge funds in our database with CNP holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are a large number of methods stock traders use to grade their holdings. Some of the most underrated methods are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can outpace the S&P 500 by a significant amount (see the details here).
[caption id="attachment_26340" align="aligncenter" width="400"] Ken Griffin of Citadel Investment Group[/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. Now we're going to take a glance at the new hedge fund action regarding CenterPoint Energy, Inc. (NYSE:CNP).
How are hedge funds trading CenterPoint Energy, Inc. (NYSE:CNP)?
At the end of the fourth quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position in CNP a year ago. With hedgies' capital changing hands, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in CenterPoint Energy, Inc. (NYSE:CNP) was held by Citadel Investment Group, which reported holding $389.7 million worth of stock at the end of September. It was followed by Zimmer Partners with a $269.6 million position. Other investors bullish on the company included Levin Easterly Partners, Renaissance Technologies, and Millennium Management. In terms of the portfolio weights assigned to each position Covalis Capital allocated the biggest weight to CenterPoint Energy, Inc. (NYSE:CNP), around 8.67% of its 13F portfolio. Blackstart Capital is also relatively very bullish on the stock, dishing out 6.59 percent of its 13F equity portfolio to CNP.
Judging by the fact that CenterPoint Energy, Inc. (NYSE:CNP) has witnessed falling interest from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of fund managers who sold off their positions entirely by the end of the third quarter. Interestingly, D. E. Shaw's D E Shaw sold off the largest stake of the "upper crust" of funds tracked by Insider Monkey, comprising an estimated $12.8 million in stock, and Robert B. Gillam's McKinley Capital Management was right behind this move, as the fund sold off about $10.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to CenterPoint Energy, Inc. (NYSE:CNP). We will take a look at UDR, Inc. (NYSE:UDR), Extra Space Storage, Inc. (NYSE:EXR), Sasol Limited (NYSE:SSL), and EXACT Sciences Corporation (NASDAQ:EXAS). All of these stocks' market caps are similar to CNP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UDR,21,360515,-4 EXR,28,206461,-2 SSL,7,16214,-2 EXAS,41,914942,2 Average,24.25,374533,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $375 million. That figure was $1327 million in CNP's case. EXACT Sciences Corporation (NASDAQ:EXAS) is the most popular stock in this table. On the other hand Sasol Limited (NYSE:SSL) is the least popular one with only 7 bullish hedge fund positions. CenterPoint Energy, Inc. (NYSE:CNP) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 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 beat the market by 3.2 percentage points. Unfortunately CNP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CNP were disappointed as the stock returned -53.7% 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.