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 Emcor Group Inc (NYSE:EME).
Emcor Group Inc (NYSE:EME) investors should be aware of an increase in enthusiasm from smart money recently. Our calculations also showed that EME isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Clint Carlson of Carlson Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the key hedge fund action encompassing Emcor Group Inc (NYSE:EME).
How have hedgies been trading Emcor Group Inc (NYSE:EME)?
At Q3’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the second quarter of 2019. By comparison, 20 hedge funds held shares or bullish call options in EME a year ago. So, let’s check out 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 Emcor Group Inc (NYSE:EME), which was worth $88 million at the end of the third quarter. On the second spot was GLG Partners which amassed $40.1 million worth of shares. Carlson Capital, Arrowstreet Capital, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Third Avenue Management allocated the biggest weight to Emcor Group Inc (NYSE:EME), around 0.64% of its portfolio. Carlson Capital is also relatively very bullish on the stock, designating 0.54 percent of its 13F equity portfolio to EME.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Tudor Investment Corp, managed by Paul Tudor Jones, established the most valuable position in Emcor Group Inc (NYSE:EME). Tudor Investment Corp had $1.6 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $1.6 million position during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management, Michael Gelband’s ExodusPoint Capital, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks similar to Emcor Group Inc (NYSE:EME). These stocks are Blackstone Mortgage Trust Inc (NYSE:BXMT), 10x Genomics, Inc. (NASDAQ:TXG), Macy’s, Inc. (NYSE:M), and Western Alliance Bancorporation (NYSE:WAL). This group of stocks’ market valuations match EME’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BXMT | 15 | 84778 | -5 |
| TXG | 19 | 135952 | 19 |
| M | 28 | 652339 | -3 |
| WAL | 25 | 254686 | -2 |
| Average | 21.75 | 281939 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $282 million. That figure was $243 million in EME’s case. Macy’s, Inc. (NYSE:M) is the most popular stock in this table. On the other hand Blackstone Mortgage Trust Inc (NYSE:BXMT) is the least popular one with only 15 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. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately EME wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EME were disappointed as the stock returned 3.4% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
