Were Hedge Funds Right About The Estee Lauder Companies Inc (EL)?

Is The Estee Lauder Companies Inc (NYSE:EL) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is The Estee Lauder Companies Inc (NYSE:EL) the right pick for your portfolio? The smart money was in an optimistic mood. The number of long hedge fund bets inched up by 2 in recent months. The Estee Lauder Companies Inc (NYSE:EL) was in 46 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 50. Our calculations also showed that EL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 44 hedge funds in our database with EL holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most shareholders, hedge funds are perceived as worthless, old financial tools of yesteryear. While there are over 8000 funds with their doors open at the moment, We look at the elite of this club, approximately 850 funds. Most estimates calculate that this group of people orchestrate the majority of the hedge fund industry’s total asset base, and by tracking their highest performing equity investments, Insider Monkey has determined several investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Cliff Asness of AQR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now let’s analyze the latest hedge fund action surrounding The Estee Lauder Companies Inc (NYSE:EL).

What does smart money think about The Estee Lauder Companies Inc (NYSE:EL)?

Heading into the third quarter of 2020, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EL over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in The Estee Lauder Companies Inc (NYSE:EL) was held by Ako Capital, which reported holding $301.5 million worth of stock at the end of September. It was followed by AQR Capital Management with a $249.1 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Select Equity Group. In terms of the portfolio weights assigned to each position Keywise Capital Management allocated the biggest weight to The Estee Lauder Companies Inc (NYSE:EL), around 5.63% of its 13F portfolio. Ako Capital is also relatively very bullish on the stock, setting aside 5.26 percent of its 13F equity portfolio to EL.

As one would reasonably expect, key hedge funds were breaking ground themselves. Millennium Management, managed by Israel Englander, created the largest position in The Estee Lauder Companies Inc (NYSE:EL). Millennium Management had $78.8 million invested in the company at the end of the quarter. Robert Joseph Caruso’s Select Equity Group also made a $72.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Greg Poole’s Echo Street Capital Management, Fang Zheng’s Keywise Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Estee Lauder Companies Inc (NYSE:EL) but similarly valued. We will take a look at The Blackstone Group Inc. (NYSE:BX), Stryker Corporation (NYSE:SYK), Intuitive Surgical, Inc. (NASDAQ:ISRG), Anthem Inc (NYSE:ANTM), Fiserv, Inc. (NASDAQ:FISV), Booking Holdings Inc. (NASDAQ:BKNG), and Zoetis Inc (NYSE:ZTS). This group of stocks’ market caps are closest to EL’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 64 hedge funds with bullish positions and the average amount invested in these stocks was $2945 million. That figure was $1198 million in EL’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Intuitive Surgical, Inc. (NASDAQ:ISRG) is the least popular one with only 43 bullish hedge fund positions. The Estee Lauder Companies Inc (NYSE:EL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EL is 37.4. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 30% in 2020 through October 23rd and still beat the market by 21 percentage points. A small number of hedge funds were also right about betting on EL as the stock returned 24.9% since the end of the second quarter (through 10/23) and outperformed the market by an even larger margin.

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