The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at CenterPoint Energy, Inc. (NYSE:CNP) from the perspective of those elite funds.
Is CenterPoint Energy, Inc. (NYSE:CNP) a bargain? Hedge funds are becoming less hopeful. The number of long hedge fund positions shrunk by 2 lately. At the end of this article we will also compare CNP to other stocks including Masco Corporation (NYSE:MAS), Whole Foods Market, Inc. (NASDAQ:WFM), and Ball Corporation (NYSE:BLL) to get a better sense of its popularity.
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How are hedge funds trading CenterPoint Energy, Inc. (NYSE:CNP)?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 9% dip from the previous quarter, pushing hedge fund ownership of the stock to a yearly low. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Steadfast Capital Management, managed by Robert Pitts, holds the largest position in CenterPoint Energy, Inc. (NYSE:CNP). Steadfast Capital Management has a $160.4 million position in the stock, comprising 2.9% of its 13F portfolio. The second most bullish fund manager is Luminus Management, led by Jonathan Barrett and Paul Segal, holding a $106.4 million position; the fund has 2.7% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions comprise Cliff Asness’ AQR Capital Management, Israel Englander’s Millennium Management and Phill Gross and Robert Atchinson’s Adage Capital Management.
Seeing as CenterPoint Energy, Inc. (NYSE:CNP) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds who sold off their entire stakes in the third quarter. Intriguingly, Paul Singer’s Elliott Management cut the largest two stakes of the 700 funds monitored by Insider Monkey, totaling an estimated $280.9 million in call options, plus a $25.7 million long position. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to CenterPoint Energy, Inc. (NYSE:CNP). These stocks are Masco Corporation (NYSE:MAS), Whole Foods Market, Inc. (NASDAQ:WFM), Ball Corporation (NYSE:BLL), and Annaly Capital Management, Inc. (NYSE:NLY). This group of stocks’ market valuations are similar to CNP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MAS | 38 | 1212193 | 5 |
| WFM | 28 | 768340 | 2 |
| BLL | 35 | 1617854 | -7 |
| NLY | 13 | 120034 | -4 |
As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $930 million. That figure was $590 million in CNP’s case. Masco Corporation (NYSE:MAS) is the most popular stock in this table. On the other hand Annaly Capital Management, Inc. (NYSE:NLY) is the least popular one with only 13 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MAS might be a better candidate to consider a long position in.
Disclosure: None
