Is CNP Stock A Buy or Sell?

In this article we will check out the progression of hedge fund sentiment towards CenterPoint Energy, Inc. (NYSE:CNP) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is CNP stock a buy? CenterPoint Energy, Inc. (NYSE:CNP) was in 30 hedge funds’ portfolios at the end of December. The all time high for this statistic is 38. CNP investors should pay attention to an increase in hedge fund sentiment in recent months. There were 20 hedge funds in our database with CNP holdings at the end of September. Our calculations also showed that CNP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Stuart Zimmer of Zimmer Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to analyze the key hedge fund action encompassing CenterPoint Energy, Inc. (NYSE:CNP).

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

Heading into the first quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in CNP a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in CenterPoint Energy, Inc. (NYSE:CNP), which was worth $225.4 million at the end of the fourth quarter. On the second spot was Adage Capital Management which amassed $57.9 million worth of shares. Millennium Management, Levin Easterly Partners, and ExodusPoint Capital 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 Coann Capital allocated the biggest weight to CenterPoint Energy, Inc. (NYSE:CNP), around 8.93% of its 13F portfolio. Yaupon Capital is also relatively very bullish on the stock, designating 4.17 percent of its 13F equity portfolio to CNP.

Consequently, specific money managers have been driving this bullishness. Coann Capital, managed by Matthew Davis, created the biggest position in CenterPoint Energy, Inc. (NYSE:CNP). Coann Capital had $9.9 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also initiated a $8.7 million position during the quarter. The other funds with new positions in the stock are Steve Pattyn’s Yaupon Capital, Stuart J. Zimmer’s Zimmer Partners, and Valerie Malter’s Matarin Capital.

Let’s now take a look at hedge fund activity in other stocks similar to CenterPoint Energy, Inc. (NYSE:CNP). These stocks are Icahn Enterprises LP (NASDAQ:IEP), Zai Lab Limited (NASDAQ:ZLAB), Universal Health Services, Inc. (NYSE:UHS), Cree, Inc. (NASDAQ:CREE), Medical Properties Trust, Inc. (NYSE:MPW), Nordson Corporation (NASDAQ:NDSN), and International Flavors & Fragrances Inc (NYSE:IFF). All of these stocks’ market caps are similar to CNP’s market cap.

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As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $2070 million. That figure was $438 million in CNP’s case. Universal Health Services, Inc. (NYSE:UHS) is the most popular stock in this table. On the other hand Icahn Enterprises LP (NASDAQ:IEP) is the least popular one with only 4 bullish hedge fund positions. CenterPoint Energy, Inc. (NYSE:CNP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CNP is 70.8. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on CNP, though not to the same extent, as the stock returned 8.7% since Q4 (through April 12th) and outperformed the market as well.

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