Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Ecolab Inc. (NYSE:ECL).
Is Ecolab Inc. (NYSE:ECL) an outstanding investment today? The smart money was reducing their bets on the stock. The number of long hedge fund bets retreated by 9 in recent months. Ecolab Inc. (NYSE:ECL) was in 39 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 52. Our calculations also showed that ECL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 48 hedge funds in our database with ECL holdings at the end of June.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now let’s view the fresh hedge fund action surrounding Ecolab Inc. (NYSE:ECL).
John Overdeck of Two Sigma Advisors
Do Hedge Funds Think ECL Is A Good Stock To Buy Now?
At Q3’s end, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ECL over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Ecolab Inc. (NYSE:ECL) was held by Bill & Melinda Gates Foundation Trust, which reported holding $910.9 million worth of stock at the end of September. It was followed by Impax Asset Management with a $708.6 million position. Other investors bullish on the company included Cantillon Capital Management, Two Sigma Advisors, and AQR Capital Management. In terms of the portfolio weights assigned to each position Bill & Melinda Gates Foundation Trust allocated the biggest weight to Ecolab Inc. (NYSE:ECL), around 3.93% of its 13F portfolio. Columbus Point is also relatively very bullish on the stock, designating 2.97 percent of its 13F equity portfolio to ECL.
Seeing as Ecolab Inc. (NYSE:ECL) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedge funds that decided to sell off their full holdings heading into Q4. At the top of the heap, Renaissance Technologies dropped the biggest investment of the 750 funds tracked by Insider Monkey, worth about $40.3 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dropped its stock, about $24.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 9 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ecolab Inc. (NYSE:ECL) but similarly valued. We will take a look at Eaton Corporation plc (NYSE:ETN), Norfolk Southern Corp. (NYSE:NSC), Dominion Energy Inc. (NYSE:D), America Movil SAB de CV (NYSE:AMX), NIO Inc. (NYSE:NIO), FedEx Corporation (NYSE:FDX), and América Móvil, S.A.B. de C.V. (NYSE:AMOV). This group of stocks’ market valuations resemble ECL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ETN | 45 | 1089775 | 5 |
| NSC | 46 | 1049404 | -12 |
| D | 27 | 545194 | -7 |
| AMX | 11 | 167723 | -2 |
| NIO | 30 | 1138194 | -4 |
| FDX | 49 | 1682204 | -12 |
| AMOV | 1 | 300 | 0 |
| Average | 29.9 | 810399 | -4.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.9 hedge funds with bullish positions and the average amount invested in these stocks was $810 million. That figure was $2552 million in ECL’s case. FedEx Corporation (NYSE:FDX) is the most popular stock in this table. On the other hand América Móvil, S.A.B. de C.V. (NYSE:AMOV) is the least popular one with only 1 bullish hedge fund positions. Ecolab Inc. (NYSE:ECL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ECL is 58.1. 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. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on ECL, though not to the same extent, as the stock returned 6.2% since Q3 (through November 30th) and outperformed the market as well.
Follow Ecolab Inc. (NYSE:ECL)
Follow Ecolab Inc. (NYSE:ECL)
Suggested Articles:
- 12 Best Restaurant Stocks to Invest In
- Best Stocks To Buy For Early Retirement
- Largest defense contractors in 2021
Disclosure: None. This article was originally published at Insider Monkey.
