Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Emcor Group Inc (NYSE:EME).
Emcor Group Inc (NYSE:EME) was in 26 hedge funds’ portfolios at the end of the first quarter of 2019. EME investors should be aware of an increase in hedge fund interest recently. There were 18 hedge funds in our database with EME positions at the end of the previous quarter. Our calculations also showed that eme isn’t among the 30 most popular stocks among hedge funds.
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. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a peek at the key hedge fund action encompassing Emcor Group Inc (NYSE:EME).
How are hedge funds trading Emcor Group Inc (NYSE:EME)?
Heading into the second quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 44% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in EME a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Emcor Group Inc (NYSE:EME), with a stake worth $56.3 million reported as of the end of March. Trailing AQR Capital Management was GLG Partners, which amassed a stake valued at $48.2 million. Carlson Capital, Citadel Investment Group, and ACK Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key money managers were leading the bulls’ herd. ACK Asset Management, managed by Richard S. Meisenberg, created the most outsized position in Emcor Group Inc (NYSE:EME). ACK Asset Management had $15.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $11.8 million investment in the stock during the quarter. The other funds with brand new EME positions are Joel Greenblatt’s Gotham Asset Management, Dmitry Balyasny’s Balyasny Asset Management, and Minhua Zhang’s Weld Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Emcor Group Inc (NYSE:EME) but similarly valued. We will take a look at Rayonier Inc. (NYSE:RYN), Eastgroup Properties Inc (NYSE:EGP), Tribune Media Company (NYSE:TRCO), and LogMeIn Inc (NASDAQ:LOGM). This group of stocks’ market values are closest to EME’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RYN | 14 | 318375 | -5 |
| EGP | 7 | 31107 | 0 |
| TRCO | 28 | 1320785 | -12 |
| LOGM | 27 | 483334 | -1 |
| Average | 19 | 538400 | -4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $538 million. That figure was $249 million in EME’s case. Tribune Media Company (NYSE:TRCO) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 7 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on EME as the stock returned 11.5% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
