The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Emerson Electric Co. (NYSE:EMR) from the perspective of those elite funds.
Is Emerson Electric Co. (NYSE:EMR) the right pick for your portfolio? The smart money is taking a bearish view. The number of long hedge fund bets were cut by 4 recently. EMR was in 28 hedge funds’ portfolios at the end of the third quarter of 2016. There were 32 hedge funds in our database with EMR positions at the end of the previous quarter. 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 Charles Schwab Corp (NYSE:SCHW), Korea Electric Power Corporation (ADR) (NYSE:KEP), and Constellation Brands, Inc. (NYSE:STZ) to gather more data points.
Follow Emerson Electric Co (NYSE:EMR)
Follow Emerson Electric Co (NYSE:EMR)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Electric
What does the smart money think about Emerson Electric Co. (NYSE:EMR)?
Heading into the fourth quarter of 2016, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 13% fall from one quarter earlier. Hedge fund ownership of the stock hit its lowest point in the last five quarters as of September 30. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the most valuable position in Emerson Electric Co. (NYSE:EMR). Adage Capital Management has a $94 million position in the stock. On Adage Capital Management’s heels is International Value Advisers, managed by Charles de Vaulx, which holds a $65.4 million position; 1.9% of its 13F portfolio is allocated to the company. Some other peers that are bullish encompass Andreas Halvorsen’s Viking Global, Joel Greenblatt’s Gotham Asset Management and Cliff Asness’ AQR Capital Management.
Since Emerson Electric Co. (NYSE:EMR) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there exists a select few fund managers that elected to cut their positions entirely in the third quarter. Interestingly, Clint Murray’s Lodge Hill Capital dropped the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising close to $31.3 million in stock, and Michael Messner’s Seminole Capital (Investment Mgmt) was right behind this move, as the fund said goodbye to about $20.8 million worth of stock. These transactions are interesting, as total hedge fund interest fell by 4 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Emerson Electric Co. (NYSE:EMR). These stocks are Charles Schwab Corp (NYSE:SCHW), Korea Electric Power Corporation (ADR) (NYSE:KEP), Constellation Brands, Inc. (NYSE:STZ), and Twenty-First Century Fox Inc (NASDAQ:FOXA). This group of stocks’ market values are similar to EMR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SCHW | 44 | 2680313 | 6 |
| KEP | 14 | 125755 | 1 |
| STZ | 67 | 6679779 | -2 |
| FOXA | 48 | 3558064 | -1 |
As you can see these stocks had an average of 43.25 hedge funds with bullish positions and the average amount invested in these stocks was $3.26 billion. That figure was $411 million in EMR’s case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (ADR) (NYSE:KEP) is the least popular one with only 14 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard STZ might be a better candidate to consider a long position.
Disclosure: None
