We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of ESCO Technologies Inc. (NYSE:ESE).
Is ESCO Technologies Inc. (NYSE:ESE) ready to rally soon? Prominent investors are betting on the stock. The number of long hedge fund bets rose by 1 lately. Our calculations also showed that ESE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
According to most traders, hedge funds are perceived as worthless, old financial vehicles of yesteryear. While there are more than 8000 funds trading today, Our experts choose to focus on the masters of this group, approximately 850 funds. Most estimates calculate that this group of people control most of all hedge funds’ total capital, and by following their unrivaled stock picks, Insider Monkey has uncovered various investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Charles Davidson of Wexford Capital
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a peek at the recent hedge fund action encompassing ESCO Technologies Inc. (NYSE:ESE).
How are hedge funds trading ESCO Technologies Inc. (NYSE:ESE)?
Heading into the first quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in ESE a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in ESCO Technologies Inc. (NYSE:ESE) was held by Cardinal Capital, which reported holding $22.5 million worth of stock at the end of September. It was followed by GLG Partners with a $7 million position. Other investors bullish on the company included Select Equity Group, Arrowstreet Capital, and Wexford Capital. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to ESCO Technologies Inc. (NYSE:ESE), around 0.69% of its 13F portfolio. Wexford Capital is also relatively very bullish on the stock, dishing out 0.13 percent of its 13F equity portfolio to ESE.
Now, some big names have been driving this bullishness. Cardinal Capital, managed by Amy Minella, created the largest position in ESCO Technologies Inc. (NYSE:ESE). Cardinal Capital had $22.5 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $7 million position during the quarter. The other funds with brand new ESE positions are Robert Joseph Caruso’s Select Equity Group, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Charles Davidson and Joseph Jacobs’s Wexford Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as ESCO Technologies Inc. (NYSE:ESE) but similarly valued. We will take a look at Sanmina Corporation (NASDAQ:SANM), Noble Midstream Partners LP (NASDAQ:NBLX), Fabrinet (NYSE:FN), and Steelcase Inc. (NYSE:SCS). All of these stocks’ market caps resemble ESE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SANM | 21 | 234374 | -1 |
| NBLX | 5 | 7417 | 1 |
| FN | 25 | 223783 | 3 |
| SCS | 30 | 163843 | 6 |
| Average | 20.25 | 157354 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $43 million in ESE’s case. Steelcase Inc. (NYSE:SCS) is the most popular stock in this table. On the other hand Noble Midstream Partners LP (NASDAQ:NBLX) is the least popular one with only 5 bullish hedge fund positions. ESCO Technologies Inc. (NYSE:ESE) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately ESE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ESE investors were disappointed as the stock returned -18% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
