Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Clearway Energy, Inc. (NYSE:CWEN).
Clearway Energy, Inc. (NYSE:CWEN) has seen a decrease in hedge fund sentiment in recent months. Our calculations also showed that CWEN isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the fresh hedge fund action encompassing Clearway Energy, Inc. (NYSE:CWEN).
What have hedge funds been doing with Clearway Energy, Inc. (NYSE:CWEN)?
Heading into the third quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -30% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in CWEN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Clearway Energy, Inc. (NYSE:CWEN), which was worth $36.8 million at the end of the second quarter. On the second spot was Cyrus Capital Partners which amassed $31.7 million worth of shares. Moreover, Renaissance Technologies, Appaloosa Management LP, and Governors Lane were also bullish on Clearway Energy, Inc. (NYSE:CWEN), allocating a large percentage of their portfolios to this stock.
Due to the fact that Clearway Energy, Inc. (NYSE:CWEN) has witnessed a decline in interest from the smart money, it’s easy to see that there lies a certain “tier” of hedge funds that slashed their positions entirely in the second quarter. Intriguingly, Brian Olson, Baehyun Sung, and Jamie Waters’s Blackstart Capital dumped the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $10 million in stock, and Edward A. Mule’s Silver Point Capital was right behind this move, as the fund dumped about $6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 8 funds in the second quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Clearway Energy, Inc. (NYSE:CWEN) but similarly valued. These stocks are Darling Ingredients Inc. (NYSE:DAR), Taro Pharmaceutical Industries Ltd. (NYSE:TARO), Semtech Corporation (NASDAQ:SMTC), and Louisiana-Pacific Corporation (NYSE:LPX). This group of stocks’ market valuations are similar to CWEN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DAR | 16 | 193087 | -3 |
| TARO | 10 | 72472 | 0 |
| SMTC | 17 | 208784 | -2 |
| LPX | 27 | 393287 | -1 |
| Average | 17.5 | 216908 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $152 million in CWEN’s case. Louisiana-Pacific Corporation (NYSE:LPX) is the most popular stock in this table. On the other hand Taro Pharmaceutical Industries Ltd. (NYSE:TARO) is the least popular one with only 10 bullish hedge fund positions. Clearway Energy, Inc. (NYSE:CWEN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on CWEN as the stock returned 9.5% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
