Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Emcor Group Inc (NYSE:EME).
Emcor Group Inc (NYSE:EME) investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Rayonier Inc. (NYSE:RYN), BBVA Banco Frances S.A. (ADR) (NYSE:BFR), and Ritchie Bros. Auctioneers (USA) (NYSE:RBA) to gather more data points.
Follow Emcor Group Inc. (NYSE:EME)
Follow Emcor Group Inc. (NYSE:EME)
With all of this in mind, we’re going to take a look at the recent action encompassing Emcor Group Inc (NYSE:EME).
What does the smart money think about Emcor Group Inc (NYSE:EME)?
At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the second quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the largest position in Emcor Group Inc (NYSE:EME). Royce & Associates has a $91.6 million position in the stock, comprising 0.5% of its 13F portfolio. The second largest stake is held by Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $25.1 million position; 0.1% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish include Lee Munder’s Lee Munder Capital Group, Lawrence Sapanski’s Scoria Capital and Joel Greenblatt’s Gotham Asset Management.
As one would reasonably expect, key money managers were leading the bulls’ herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the most valuable position in Emcor Group Inc (NYSE:EME). Adage Capital Management had $25.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $9.1 million investment in the stock during the quarter. The other funds with brand new EME positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Peter Muller’s PDT Partners, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Emcor Group Inc (NYSE:EME) but similarly valued. These stocks are Rayonier Inc. (NYSE:RYN), BBVA Banco Frances S.A. (ADR) (NYSE:BFR), Ritchie Bros. Auctioneers (USA) (NYSE:RBA), and Boston Beer Co Inc (NYSE:SAM). All of these stocks’ market caps resemble EME’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RYN | 14 | 410087 | -4 |
| BFR | 6 | 37140 | 0 |
| RBA | 24 | 278192 | 9 |
| SAM | 24 | 271005 | -3 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $249 million. That figure was $230 million in EME’s case. Ritchie Bros. Auctioneers (USA) (NYSE:RBA) is the most popular stock in this table. On the other hand BBVA Banco Frances S.A. (ADR) (NYSE:BFR) is the least popular one with only 6 bullish hedge fund positions. Emcor Group Inc (NYSE:EME) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RBA might be a better candidate to consider a long position.
