As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Emerson Electric Co. (NYSE:EMR).
Emerson Electric Co. (NYSE:EMR) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 45 hedge funds’ portfolios at the end of June. Our calculations also showed that EMR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare EMR to other stocks including The Progressive Corporation (NYSE:PGR), Humana Inc (NYSE:HUM), and KE Holdings Inc (NYSE:BEKE) to get a better sense of its popularity.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging AI stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to review the new hedge fund action surrounding Emerson Electric Co. (NYSE:EMR).
Do Hedge Funds Think EMR Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 36 hedge funds held shares or bullish call options in EMR a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of Emerson Electric Co. (NYSE:EMR), with a stake worth $175 million reported as of the end of June. Trailing Millennium Management was Adage Capital Management, which amassed a stake valued at $156.2 million. AQR Capital Management, Appaloosa Management LP, and Balyasny Asset Management 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 Albar Capital allocated the biggest weight to Emerson Electric Co. (NYSE:EMR), around 3.85% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, designating 2.71 percent of its 13F equity portfolio to EMR.
Seeing as Emerson Electric Co. (NYSE:EMR) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of fund managers that elected to cut their full holdings in the second quarter. Intriguingly, Benjamin A. Smith’s Laurion Capital Management dropped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, totaling about $9 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also said goodbye to its stock, about $2.2 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Emerson Electric Co. (NYSE:EMR). These stocks are The Progressive Corporation (NYSE:PGR), Humana Inc (NYSE:HUM), KE Holdings Inc (NYSE:BEKE), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), NXP Semiconductors NV (NASDAQ:NXPI), Honda Motor Co Ltd (NYSE:HMC), and Global Payments Inc (NYSE:GPN). This group of stocks’ market values match EMR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PGR | 44 | 1338423 | -1 |
| HUM | 59 | 3257015 | 6 |
| BEKE | 31 | 2712876 | -2 |
| CRWD | 66 | 7266652 | -11 |
| NXPI | 52 | 1336949 | -1 |
| HMC | 10 | 374945 | -2 |
| GPN | 66 | 4858185 | 4 |
| Average | 46.9 | 3020721 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.9 hedge funds with bullish positions and the average amount invested in these stocks was $3021 million. That figure was $854 million in EMR’s case. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 10 bullish hedge fund positions. Emerson Electric Co. (NYSE:EMR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EMR is 65.6. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.9% in 2021 through October 1st and surpassed the market again by 5.6 percentage points. Unfortunately EMR wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); EMR investors were disappointed as the stock returned -0.6% since the end of June (through 10/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Emerson Electric Co (NYSE:EMR)
Follow Emerson Electric Co (NYSE:EMR)
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Disclosure: None. This article was originally published at Insider Monkey.
