The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded CenterPoint Energy, Inc. (NYSE:CNP) based on those filings.
Is CenterPoint Energy, Inc. (NYSE:CNP) undervalued? Prominent investors were taking a pessimistic view. The number of bullish hedge fund positions shrunk by 5 recently. CenterPoint Energy, Inc. (NYSE:CNP) was in 20 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 38. Our calculations also showed that CNP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to analyze the fresh hedge fund action surrounding CenterPoint Energy, Inc. (NYSE:CNP).
Do Hedge Funds Think CNP Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CNP over the last 24 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Phill Gross and Robert Atchinson’s Adage Capital Management has the largest position in CenterPoint Energy, Inc. (NYSE:CNP), worth close to $68.2 million, comprising 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Point72 Asset Management, led by Steve Cohen, holding a $65.8 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism comprise Michael Gelband’s ExodusPoint Capital, John Murphy’s Levin Easterly Partners and Didric Cederholm’s Lion Point. In terms of the portfolio weights assigned to each position Yaupon Capital allocated the biggest weight to CenterPoint Energy, Inc. (NYSE:CNP), around 5.13% of its 13F portfolio. Lion Point is also relatively very bullish on the stock, earmarking 4.13 percent of its 13F equity portfolio to CNP.
Due to the fact that CenterPoint Energy, Inc. (NYSE:CNP) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few hedge funds that elected to cut their positions entirely by the end of the second quarter. Interestingly, Matthew Davis’s Coann Capital sold off the biggest investment of the “upper crust” of funds tracked by Insider Monkey, worth about $11.3 million in stock, and Stuart J. Zimmer’s Zimmer Partners was right behind this move, as the fund dumped about $7.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 5 funds by the end of the second quarter.
Let’s now review hedge fund activity in other stocks similar to CenterPoint Energy, Inc. (NYSE:CNP). We will take a look at Signature Bank (NASDAQ:SBNY), WestRock Company (NYSE:WRK), GoodRx Holdings, Inc. (NASDAQ:GDRX), Wynn Resorts, Limited (NASDAQ:WYNN), ABIOMED, Inc. (NASDAQ:ABMD), Oak Street Health, Inc. (NYSE:OSH), and Aluminum Corp. of China Limited (NYSE:ACH). This group of stocks’ market values are closest to CNP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SBNY | 43 | 787102 | 3 |
| WRK | 32 | 572106 | 5 |
| GDRX | 28 | 635923 | 4 |
| WYNN | 37 | 712498 | -12 |
| ABMD | 24 | 899188 | -2 |
| OSH | 33 | 561397 | 2 |
| ACH | 4 | 8000 | 1 |
| Average | 28.7 | 596602 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.7 hedge funds with bullish positions and the average amount invested in these stocks was $597 million. That figure was $288 million in CNP’s case. Signature Bank (NASDAQ:SBNY) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 4 bullish hedge fund positions. CenterPoint Energy, Inc. (NYSE:CNP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CNP is 36.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on CNP as the stock returned 8.9% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
