There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze CMS Energy Corporation (NYSE:CMS).
Is CMS Energy Corporation (NYSE:CMS) going to take off soon? Investors who are in the know are betting on the stock. The number of long hedge fund bets rose by 4 lately. Our calculations also showed that CMS isn’t among the 30 most popular stocks among hedge funds. CMS was in 22 hedge funds’ portfolios at the end of the third quarter of 2018. There were 18 hedge funds in our database with CMS positions at the end of the previous quarter.
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 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 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.
We’re going to check out the fresh hedge fund action surrounding CMS Energy Corporation (NYSE:CMS).
What have hedge funds been doing with CMS Energy Corporation (NYSE:CMS)?
Heading into the fourth quarter of 2018, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards CMS over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in CMS Energy Corporation (NYSE:CMS) was held by Renaissance Technologies, which reported holding $142.7 million worth of stock at the end of September. It was followed by Millennium Management with a $48.9 million position. Other investors bullish on the company included AQR Capital Management, Adage Capital Management, and Two Sigma Advisors.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Covalis Capital, managed by ZilvinasáMecelis, initiated the most outsized position in CMS Energy Corporation (NYSE:CMS). Covalis Capital had $9.9 million invested in the company at the end of the quarter. Jeffrey Talpins’s Element Capital Management also made a $2 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, George Zweig, Shane Haas and Ravi Chander’s Signition LP, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
Let’s now take a look at hedge fund activity in other stocks similar to CMS Energy Corporation (NYSE:CMS). These stocks are Darden Restaurants, Inc. (NYSE:DRI), Wynn Resorts, Limited (NASDAQ:WYNN), Fortis Inc. (NYSE:FTS), and Teck Resources Ltd (NYSE:TECK). This group of stocks’ market values are similar to CMS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DRI | 22 | 980978 | -3 |
| WYNN | 43 | 2481578 | -1 |
| FTS | 14 | 230527 | 0 |
| TECK | 35 | 1102798 | 2 |
| Average | 28.5 | 1198970 | -0.5 |
View table here if you experience formatting issues.
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 $1.20 billion. That figure was $282 million in CMS’s case. Wynn Resorts, Limited (NASDAQ:WYNN) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 14 bullish hedge fund positions. CMS Energy Corporation (NYSE:CMS) 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 WYNN might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
