Was The Smart Money Right About The Estee Lauder Companies Inc (EL)?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards The Estee Lauder Companies Inc (NYSE:EL) at the end of the third quarter and determine whether the smart money was really smart about this stock.

The Estee Lauder Companies Inc (NYSE:EL) has seen a decrease in activity from the world’s largest hedge funds of late. The Estee Lauder Companies Inc (NYSE:EL) was in 49 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 59. There were 50 hedge funds in our database with EL holdings at the end of June. Our calculations also showed that EL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. With all of this in mind let’s take a peek at the recent hedge fund action surrounding The Estee Lauder Companies Inc (NYSE:EL).

Dan Loeb of Third Point

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

At Q3’s end, a total of 49 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from one quarter earlier. By comparison, 46 hedge funds held shares or bullish call options in EL a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Among these funds, Fundsmith LLP held the most valuable stake in The Estee Lauder Companies Inc (NYSE:EL), which was worth $2049 million at the end of the third quarter. On the second spot was Ako Capital which amassed $360.8 million worth of shares. Third Point, AQR Capital Management, and Bridgewater Associates 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 Fundsmith LLP allocated the biggest weight to The Estee Lauder Companies Inc (NYSE:EL), around 5.66% of its 13F portfolio. Sustainable Insight Capital Management is also relatively very bullish on the stock, setting aside 4.59 percent of its 13F equity portfolio to EL.

Because The Estee Lauder Companies Inc (NYSE:EL) has witnessed falling interest from the smart money, it’s easy to see that there is a sect of money managers that slashed their positions entirely by the end of the third quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest position of the 750 funds monitored by Insider Monkey, valued at about $39.1 million in stock. Amir Mokari’s fund, Emerson Point Capital, also said goodbye to its stock, about $6.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to The Estee Lauder Companies Inc (NYSE:EL). We will take a look at Rio Tinto Group (NYSE:RIO), HSBC Holdings plc (NYSE:HSBC), Caterpillar Inc. (NYSE:CAT), Deere & Company (NYSE:DE), S&P Global Inc. (NYSE:SPGI), 3M Company (NYSE:MMM), and Airbnb, Inc. (NASDAQ:ABNB). This group of stocks’ market values are similar to EL’s market value.

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As you can see these stocks had an average of 44.6 hedge funds with bullish positions and the average amount invested in these stocks was $2887 million. That figure was $4137 million in EL’s case. S&P Global Inc. (NYSE:SPGI) is the most popular stock in this table. On the other hand HSBC Holdings plc (NYSE:HSBC) is the least popular one with only 10 bullish hedge fund positions. The Estee Lauder Companies Inc (NYSE:EL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EL is 57.6. 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. 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 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on EL as the stock returned 4.1% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.

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