In this article we will analyze whether Emerson Electric Co. (NYSE:EMR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Emerson Electric Co. (NYSE:EMR) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 45 hedge funds’ portfolios at the end of the second quarter of 2021. Our calculations also showed that EMR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). 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 The Progressive Corporation (NYSE:PGR), Humana Inc (NYSE:HUM), and KE Holdings Inc (NYSE:BEKE) to gather more data points.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Tepper of Appaloosa Management LP
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 are checking out stock pitches like this emerging lithium stock. 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. 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. Keeping this in mind we’re going to take a glance at the key hedge fund action surrounding Emerson Electric Co. (NYSE:EMR).
Do Hedge Funds Think EMR Is A Good Stock To Buy Now?
At second quarter’s end, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EMR over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Millennium Management was the largest shareholder of Emerson Electric Co. (NYSE:EMR), with a stake worth $175 million reported as of the end of June. Trailing Millennium Management was Adage Capital Management, which amassed a stake valued at $156.2 million. AQR Capital Management, Appaloosa Management LP, and Balyasny Asset 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 Albar Capital allocated the biggest weight to Emerson Electric Co. (NYSE:EMR), around 3.85% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, designating 2.71 percent of its 13F equity portfolio to EMR.
Due to the fact that Emerson Electric Co. (NYSE:EMR) has faced a decline in interest from the smart money, logic holds that there is a sect of money managers that decided to sell off their entire stakes in the second quarter. At the top of the heap, Benjamin A. Smith’s Laurion Capital Management dropped the largest stake of the 750 funds watched by Insider Monkey, valued at close to $9 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also dumped its stock, about $2.2 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Emerson Electric Co. (NYSE:EMR) but similarly valued. These stocks are The Progressive Corporation (NYSE:PGR), Humana Inc (NYSE:HUM), KE Holdings Inc (NYSE:BEKE), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), NXP Semiconductors NV (NASDAQ:NXPI), Honda Motor Co Ltd (NYSE:HMC), and Global Payments Inc (NYSE:GPN). This group of stocks’ market values are closest to EMR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PGR | 44 | 1338423 | -1 |
| HUM | 59 | 3257015 | 6 |
| BEKE | 31 | 2712876 | -2 |
| CRWD | 66 | 7266652 | -11 |
| NXPI | 52 | 1336949 | -1 |
| HMC | 10 | 374945 | -2 |
| GPN | 66 | 4858185 | 4 |
| Average | 46.9 | 3020721 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.9 hedge funds with bullish positions and the average amount invested in these stocks was $3021 million. That figure was $854 million in EMR’s case. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 10 bullish hedge fund positions. Emerson Electric Co. (NYSE:EMR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EMR is 65.6. 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 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately EMR wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); EMR investors were disappointed as the stock returned 2.3% since the end of June (through 11/5) 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.
