Is Esterline Technologies Corporation (ESL) a Good Buy?

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Is Esterline Technologies Corporation (NYSE:ESL) the right pick for your portfolio? The smart money is in a bearish mood. The number of bullish hedge fund positions went down by 1 recently. ESL was in 21 hedge funds’ portfolios at the end of the third quarter of 2015. There were 22 hedge funds in our database with ESL holdings 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 Parsley Energy Inc (NYSE:PE), Tri Pointe Homes Inc (NYSE:TPH), and Fulton Financial Corp (NASDAQ:FULT) to gather more data points.

With all of this in mind, we’re going to take a look at the latest action encompassing Esterline Technologies Corporation (NYSE:ESL).

What have hedge funds been doing with Esterline Technologies Corporation (NYSE:ESL)?

Heading into Q4, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, holds the biggest position in Esterline Technologies Corporation (NYSE:ESL). First Pacific Advisors LLC has a $227.8 million position in the stock, comprising 2% of its 13F portfolio. The second largest stake is held by Glenn Fuhrman and John Phelan of MSD Capital, with a $114.2 million position; the fund has 15.2% of its 13F portfolio invested in the stock. Some other peers with similar optimism comprise Israel Englander’s Millennium Management, and Jim Simons’ Renaissance Technologies.

Since Esterline Technologies Corporation (NYSE:ESL) has faced a declination in interest from the entirety of the hedge funds we track, we can see that there were a few hedge funds that decided to sell off their entire stakes in the third quarter. At the top of the heap, Ralph V. Whitworth’s Relational Investors sold off the biggest position of the 700 funds followed by Insider Monkey, comprising about $205.3 million in stock. David S. Winter and David J. Millstone’s fund, 40 North Management, also sold off its stock, about $66.2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Esterline Technologies Corporation (NYSE:ESL) but similarly valued. We will take a look at Parsley Energy Inc (NYSE:PE), Tri Pointe Homes Inc (NYSE:TPH), Fulton Financial Corp (NASDAQ:FULT), and Northern Tier Energy LP (NYSE:NTI). All of these stocks’ market caps are similar to ESL’s market cap.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $444 million in ESL’s case. Parsley Energy Inc (NYSE:PE) is the most popular stock in this table. On the other hand Fulton Financial Corp (NASDAQ:FULT) is the least popular one with only 11 bullish hedge fund positions. Esterline Technologies Corporation (NYSE:ESL) is among the most popular stocks in this group and that makes it worth a closer look.