In this article we will take a look at whether hedge funds think Entergy Corporation (NYSE:ETR) is 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, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Entergy Corporation (NYSE:ETR) was in 34 hedge funds’ portfolios at the end of the first quarter of 2020. ETR investors should be aware of an increase in hedge fund sentiment in recent months. There were 31 hedge funds in our database with ETR holdings at the end of the previous quarter. Our calculations also showed that ETR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the latest hedge fund action encompassing Entergy Corporation (NYSE:ETR).
What have hedge funds been doing with Entergy Corporation (NYSE:ETR)?
Heading into the second quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ETR over the last 18 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Entergy Corporation (NYSE:ETR), with a stake worth $534.1 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $220.3 million. Millennium Management, AQR Capital Management, and Adage Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Centenus Global Management allocated the biggest weight to Entergy Corporation (NYSE:ETR), around 2.15% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, dishing out 2.01 percent of its 13F equity portfolio to ETR.
Consequently, specific money managers were leading the bulls’ herd. Soros Fund Management, managed by George Soros, established the most outsized position in Entergy Corporation (NYSE:ETR). Soros Fund Management had $4.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $3.2 million investment in the stock during the quarter. The other funds with brand new ETR positions are Greg Eisner’s Engineers Gate Manager, Qing Li’s Sciencast Management, and Renee Yao’s Neo Ivy Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Entergy Corporation (NYSE:ETR) but similarly valued. These stocks are McCormick & Company, Incorporated (NYSE:MKC), Schlumberger Limited. (NYSE:SLB), Match Group, Inc. (NASDAQ:MTCH), and Fortive Corporation (NYSE:FTV). This group of stocks’ market caps resemble ETR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MKC | 31 | 280968 | 7 |
| SLB | 49 | 641144 | 2 |
| MTCH | 38 | 1032869 | 6 |
| FTV | 35 | 1015089 | -8 |
| Average | 38.25 | 742518 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.25 hedge funds with bullish positions and the average amount invested in these stocks was $743 million. That figure was $1037 million in ETR’s case. Schlumberger Limited. (NYSE:SLB) is the most popular stock in this table. On the other hand McCormick & Company, Incorporated (NYSE:MKC) is the least popular one with only 31 bullish hedge fund positions. Entergy Corporation (NYSE:ETR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately ETR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ETR investors were disappointed as the stock returned 9.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
