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Did Hedge Funds Make The Right Call On Entergy Corporation (ETR) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Entergy Corporation (NYSE:ETR) based on that data and determine whether they were really smart about the stock.

Entergy Corporation (NYSE:ETR) investors should pay attention to an increase in enthusiasm from smart money lately. ETR was in 34 hedge funds’ portfolios at the end of March. 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.

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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the recent hedge fund action encompassing Entergy Corporation (NYSE:ETR).

What have hedge funds been doing with Entergy Corporation (NYSE:ETR)?

At the end of the first quarter, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ETR over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Is ETR A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the largest position in Entergy Corporation (NYSE:ETR). Renaissance Technologies has a $534.1 million position in the stock, comprising 0.5% of its 13F portfolio. On Renaissance Technologies’s heels is Citadel Investment Group, managed by Ken Griffin, which holds a $220.3 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism encompass Israel Englander’s Millennium Management, Cliff Asness’s AQR Capital Management and Phill Gross and Robert Atchinson’s Adage Capital Management. 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, designating 2.01 percent of its 13F equity portfolio to ETR.

Consequently, key hedge funds have been driving this bullishness. Soros Fund Management, managed by George Soros, assembled the most valuable 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 initiated a $3.2 million position during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Qing Li’s Sciencast Management, and Renee Yao’s Neo Ivy Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Entergy Corporation (NYSE:ETR) but similarly valued. We will take a look at McCormick & Company, Incorporated (NYSE:MKC), Schlumberger Limited. (NYSE:SLB), Match Group, Inc. (NASDAQ:MTCH), and Fortive Corporation (NYSE:FTV). This group of stocks’ market values match ETR’s market value.

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 12.3% in 2020 through June 30th and surpassed the market by 15.5 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 0.8% 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.