Is Emerald Holding, Inc. (EEX) Going to Burn These Hedge Funds?

In this article we are going to use hedge fund sentiment as a tool and determine whether Emerald Holding, Inc. (NYSE:EEX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Emerald Holding, Inc. (NYSE:EEX) has experienced a decrease in activity from the world’s largest hedge funds lately. Emerald Holding, Inc. (NYSE:EEX) was in 6 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 15. Our calculations also showed that EEX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to review the new hedge fund action regarding Emerald Holding, Inc. (NYSE:EEX).

Do Hedge Funds Think EEX Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EEX over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the number one position in Emerald Holding, Inc. (NYSE:EEX). D E Shaw has a $1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is Renaissance Technologies, with a $0.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism contain John Overdeck and David Siegel’s Two Sigma Advisors, Ken Griffin’s Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Two Sigma Advisors allocated the biggest weight to Emerald Holding, Inc. (NYSE:EEX), around 0.0016% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.001 percent of its 13F equity portfolio to EEX.

Since Emerald Holding, Inc. (NYSE:EEX) has faced a decline in interest from hedge fund managers, we can see that there is a sect of funds who sold off their positions entirely last quarter. Interestingly, Ali Motamed’s Invenomic Capital Management sold off the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at about $0.2 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund sold off about $0.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Emerald Holding, Inc. (NYSE:EEX). These stocks are Sunworks, Inc. (NASDAQ:SUNW), Franklin Covey Co. (NYSE:FC), West Bancorporation, Inc. (NASDAQ:WTBA), Alto Ingredients, Inc. (NASDAQ:ALTO), Viemed Healthcare, Inc. (NASDAQ:VMD), Chico’s FAS, Inc. (NYSE:CHS), and RBB Bancorp (NASDAQ:RBB). All of these stocks’ market caps match EEX’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.1 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $3 million in EEX’s case. Alto Ingredients, Inc. (NASDAQ:ALTO) is the most popular stock in this table. On the other hand West Bancorporation, Inc. (NASDAQ:WTBA) is the least popular one with only 1 bullish hedge fund positions. Emerald Holding, Inc. (NYSE:EEX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EEX is 33.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately EEX wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); EEX investors were disappointed as the stock returned -1.6% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.