Is Entergy Corporation (NYSE:ETR) 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, expert networks, and get tips from industry insiders. They sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
Entergy Corporation (NYSE:ETR) investors should pay attention to an increase in support from the world’s most elite money managers of late. Our calculations also showed that ETR isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to take a glance at the latest hedge fund action regarding Entergy Corporation (NYSE:ETR).
How are hedge funds trading Entergy Corporation (NYSE:ETR)?
At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the second quarter of 2018. On the other hand, there were a total of 24 hedge funds with a bullish position in ETR at the beginning of this year. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of Entergy Corporation (NYSE:ETR), with a stake worth $285.8 million reported as of the end of September. Trailing Millennium Management was Renaissance Technologies, which amassed a stake valued at $261.5 million. Citadel Investment Group, Luminus Management, and Adage Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, specific money managers have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the largest position in Entergy Corporation (NYSE:ETR). Adage Capital Management had $100.1 million invested in the company at the end of the quarter. Peter J. Hark’s Shelter Harbor Advisors also initiated a $8.1 million position during the quarter. The other funds with brand new ETR positions are Louis Bacon’s Moore Global Investments, Matthew Hulsizer’s PEAK6 Capital Management, and George Zweig, Shane Haas and Ravi Chander’s Signition LP.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Entergy Corporation (NYSE:ETR) but similarly valued. We will take a look at Lincoln National Corporation (NYSE:LNC), Synopsys, Inc. (NASDAQ:SNPS), Genuine Parts Company (NYSE:GPC), and Church & Dwight Co., Inc. (NYSE:CHD). This group of stocks’ market valuations match ETR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LNC | 33 | 1001611 | 5 |
| SNPS | 30 | 1204856 | 2 |
| GPC | 21 | 292208 | 5 |
| CHD | 20 | 182754 | 3 |
| Average | 26 | 670357 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $670 million. That figure was $1.33 billion in ETR’s case. Lincoln National Corporation (NYSE:LNC) is the most popular stock in this table. On the other hand Church & Dwight Co., Inc. (NYSE:CHD) is the least popular one with only 20 bullish hedge fund positions. Entergy Corporation (NYSE:ETR) 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. In this regard LNC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
