Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space.
The Estee Lauder Companies Inc (NYSE:EL) was in 39 hedge funds’ portfolios at the end of March. EL investors should be aware of an increase in hedge fund sentiment in recent months. There were 33 hedge funds in our database with EL holdings at the end of the previous quarter. Our calculations also showed that EL isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s view the key hedge fund action regarding The Estee Lauder Companies Inc (NYSE:EL).
What have hedge funds been doing with The Estee Lauder Companies Inc (NYSE:EL)?
At Q1’s end, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EL over the last 15 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in The Estee Lauder Companies Inc (NYSE:EL), which was worth $374 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $346.2 million worth of shares. Moreover, Millennium Management, Point72 Asset Management, and Two Sigma Advisors were also bullish on The Estee Lauder Companies Inc (NYSE:EL), allocating a large percentage of their portfolios to this stock.
Now, key hedge funds have jumped into The Estee Lauder Companies Inc (NYSE:EL) headfirst. Holocene Advisors, managed by Brandon Haley, created the most outsized position in The Estee Lauder Companies Inc (NYSE:EL). Holocene Advisors had $19.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $18.3 million position during the quarter. The other funds with brand new EL positions are Ernest Chow and Jonathan Howe’s Sensato Capital Management, Nick Niell’s Arrowgrass Capital Partners, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s go over hedge fund activity in other stocks similar to The Estee Lauder Companies Inc (NYSE:EL). We will take a look at Walgreens Boots Alliance Inc (NASDAQ:WBA), Colgate-Palmolive Company (NYSE:CL), CME Group Inc (NASDAQ:CME), and T-Mobile US, Inc. (NASDAQ:TMUS). This group of stocks’ market values resemble EL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WBA | 33 | 586665 | -6 |
| CL | 42 | 1907640 | -3 |
| CME | 42 | 1845552 | -8 |
| TMUS | 62 | 2675739 | -13 |
| Average | 44.75 | 1753899 | -7.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 44.75 hedge funds with bullish positions and the average amount invested in these stocks was $1754 million. That figure was $1436 million in EL’s case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand Walgreens Boots Alliance Inc (NASDAQ:WBA) is the least popular one with only 33 bullish hedge fund positions. The Estee Lauder Companies Inc (NYSE:EL) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on EL, though not to the same extent, as the stock returned 0.3% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
