Hedge Funds Are Selling CMS Energy Corporation (CMS)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about CMS Energy Corporation (NYSE:CMS).

Is CMS Energy Corporation (NYSE:CMS) a bargain? The smart money was becoming less hopeful. The number of bullish hedge fund bets shrunk by 6 recently. CMS Energy Corporation (NYSE:CMS) was in 25 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 31. Our calculations also showed that CMS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 31 hedge funds in our database with CMS positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind we’re going to take a gander at the latest hedge fund action encompassing CMS Energy Corporation (NYSE:CMS).

Stuart Zimmer of Zimmer Partners

Do Hedge Funds Think CMS Is A Good Stock To Buy Now?

At Q3’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards CMS over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Stuart J. Zimmer’s Zimmer Partners has the largest position in CMS Energy Corporation (NYSE:CMS), worth close to $166.2 million, corresponding to 2.6% of its total 13F portfolio. The second most bullish fund is Renaissance Technologies, with a $55.7 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish consist of Michael Gelband’s ExodusPoint Capital, Israel Englander’s Millennium Management and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Zimmer Partners allocated the biggest weight to CMS Energy Corporation (NYSE:CMS), around 2.62% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, earmarking 0.58 percent of its 13F equity portfolio to CMS.

Due to the fact that CMS Energy Corporation (NYSE:CMS) has witnessed bearish sentiment from the smart money, logic holds that there is a sect of fund managers that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors dropped the largest position of all the hedgies monitored by Insider Monkey, worth close to $14.8 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dropped its stock, about $8.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 6 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to CMS Energy Corporation (NYSE:CMS). These stocks are Principal Financial Group Inc (NASDAQ:PFG), Jacobs Engineering Group Inc. (NYSE:J), Lufax Holding Ltd (NYSE:LU), Avery Dennison Corporation (NYSE:AVY), Tata Motors Limited (NYSE:TTM), Diamondback Energy Inc (NASDAQ:FANG), and NVR, Inc. (NYSE:NVR). All of these stocks’ market caps resemble CMS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $519 million. That figure was $415 million in CMS’s case. Diamondback Energy Inc (NASDAQ:FANG) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 10 bullish hedge fund positions. CMS Energy Corporation (NYSE:CMS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CMS is 41.5. 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. 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 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately CMS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CMS were disappointed as the stock returned 4.8% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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