CMS Energy Corporation (CMS): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

CMS Energy Corporation (NYSE:CMS) was in 18 hedge funds’ portfolio at the end of March. CMS has experienced an increase in hedge fund sentiment in recent months. There were 14 hedge funds in our database with CMS positions at the end of the previous quarter.

If you’d ask most traders, hedge funds are perceived as underperforming, outdated investment tools of yesteryear. While there are over 8000 funds with their doors open today, we at Insider Monkey choose to focus on the elite of this club, close to 450 funds. It is widely believed that this group controls the majority of the hedge fund industry’s total capital, and by keeping an eye on their highest performing stock picks, we have revealed a number of investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as beneficial, positive insider trading activity is another way to parse down the financial markets. Just as you’d expect, there are plenty of incentives for an executive to drop shares of his or her company, but just one, very obvious reason why they would buy. Various empirical studies have demonstrated the market-beating potential of this method if shareholders understand what to do (learn more here).

Keeping this in mind, it’s important to take a peek at the latest action surrounding CMS Energy Corporation (NYSE:CMS).

Hedge fund activity in CMS Energy Corporation (NYSE:CMS)

Heading into Q2, a total of 18 of the hedge funds we track were long in this stock, a change of 29% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully.

Of the funds we track, Millennium Management, managed by Israel Englander, holds the largest position in CMS Energy Corporation (NYSE:CMS). Millennium Management has a $66.2 million position in the stock, comprising 0.3% of its 13F portfolio. The second largest stake is held by D. E. Shaw of D E Shaw, with a $41 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Phill Gross and Robert Atchinson’s Adage Capital Management, David Harding’s Winton Capital Management and Ken Griffin’s Citadel Investment Group.

Now, specific money managers were breaking ground themselves. Carlson Capital, managed by Clint Carlson, created the largest position in CMS Energy Corporation (NYSE:CMS). Carlson Capital had 13.2 million invested in the company at the end of the quarter. Douglas W. Case’s Advanced Investment Partners also made a $4.2 million investment in the stock during the quarter. The other funds with new positions in the stock are David Costen Haley’s HBK Investments, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Paul Tudor Jones’s Tudor Investment Corp.

How have insiders been trading CMS Energy Corporation (NYSE:CMS)?

Insider buying is most useful when the company in question has seen transactions within the past six months. Over the latest 180-day time period, CMS Energy Corporation (NYSE:CMS) has seen zero unique insiders purchasing, and 4 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to CMS Energy Corporation (NYSE:CMS). These stocks are Calpine Corporation (NYSE:CPN), The AES Corporation (NYSE:AES), Pinnacle West Capital Corporation (NYSE:PNW), SCANA Corporation (NYSE:SCG), and OGE Energy Corp. (NYSE:OGE). All of these stocks are in the electric utilities industry and their market caps match CMS’s market cap.

With the results exhibited by the aforementioned strategies, retail investors must always monitor hedge fund and insider trading sentiment, and CMS Energy Corporation (NYSE:CMS) shareholders fit into this picture quite nicely.

Click here to learn why you should track hedge funds