It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Ecolab Inc. (NYSE:ECL).
Ecolab Inc. (NYSE:ECL) shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. ECL was in 24 hedge funds’ portfolios at the end of the third quarter of 2016. There were 25 hedge funds in our database with ECL 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 Cognizant Technology Solutions Corp (NASDAQ:CTSH), Las Vegas Sands Corp. (NYSE:LVS), and Anthem Inc (NYSE:ANTM) to gather more data points.
Follow Ecolab Inc. (NYSE:ECL)
Follow Ecolab Inc. (NYSE:ECL)
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.
Dmitry Kalinovsky/Shutterstock.com
Keeping this in mind, let’s take a gander at the fresh action surrounding Ecolab Inc. (NYSE:ECL).
How are hedge funds trading Ecolab Inc. (NYSE:ECL)?
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Boykin Curry’s Eagle Capital Management has the biggest position in Ecolab Inc. (NYSE:ECL), worth close to $1.0948 billion, comprising 4.7% of its total 13F portfolio. The second largest stake is held by Bill & Melinda Gates Foundation Trust, led by Michael Larson, holding a $531.5 million position; 2.9% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish consist of William von Mueffling’s Cantillon Capital Management, Ian Simm’s Impax Asset Management and Phill Gross and Robert Atchinson’s Adage Capital Management.
Since Ecolab Inc. (NYSE:ECL) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there exists a select few hedgies that decided to sell off their full holdings by the end of the third quarter. Intriguingly, Israel Englander’s Millennium Management cut the biggest investment of the 700 funds tracked by Insider Monkey, comprising about $28.3 million in call options., and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $7.7 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Ecolab Inc. (NYSE:ECL). We will take a look at Cognizant Technology Solutions Corp (NASDAQ:CTSH), Las Vegas Sands Corp. (NYSE:LVS), Anthem Inc (NYSE:ANTM), and American Electric Power Company, Inc. (NYSE:AEP). This group of stocks’ market valuations are similar to ECL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTSH | 47 | 1355422 | 7 |
| LVS | 31 | 659604 | 8 |
| ANTM | 54 | 2648566 | -4 |
| AEP | 32 | 1274137 | 5 |
As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $1484 million. That figure was $2407 million in ECL’s case. Anthem Inc (NYSE:ANTM) is the most popular stock in this table. On the other hand Las Vegas Sands Corp. (NYSE:LVS) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks Ecolab Inc. (NYSE:ECL) is even less popular than LVS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
