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Eaton Corporation, PLC Ordinary Shares (ETN): Are Hedge Funds Right About This Stock?

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Now, according to many investors, hedge funds are assumed to be overrated, outdated financial tools of a period lost to current times. Although there are over 8,000 hedge funds in operation in present day, Insider Monkey focuses on the top tier of this group, around 525 funds. Analysts calculate that this group oversees the majority of all hedge funds’ total assets, and by monitoring their highest quality picks, we’ve revealed a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Just as necessary, optimistic insider trading sentiment is another way to analyze the marketplace. Just as you’d expect, there are lots of reasons for a bullish insider to downsize shares of his or her company, but just one, very simple reason why they would behave bullishly. Many academic studies have demonstrated the market-beating potential of this tactic if “monkeys” understand where to look (learn more here).

Eaton logo

Keeping this in mind, let’s study the latest info for Eaton Corporation, PLC Ordinary Shares (NYSE:ETN).

What does the smart money think about Eaton Corporation, PLC Ordinary Shares (NYSE:ETN)?

In preparation for the third quarter, a total of 45 of the hedge funds we track were long in this stock, a change of 0% from the first quarter. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially.

According to our 13F database, Christopher Medlock James’s Partner Fund Management had the largest position in Eaton Corporation, PLC Ordinary Shares (NYSE:ETN), worth close to $299.6 million, comprising 6.2% of its total 13F portfolio. Coming in second is Levin Capital Strategies, managed by John A. Levin, which held a $293.3 million position; the fund has 5.3% of its 13F portfolio invested in the stock. Other peers that are bullish include Glenn Russell Dubin’s Highbridge Capital Management, Ken Griffin’s Citadel Investment Group and Thomas E. Claugus’s GMT Capital.

Due to the fact Eaton Corporation, PLC Ordinary Shares (NYSE:ETN) has experienced a fall in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few hedge funds that slashed their full holdings at the end of the second quarter. Intriguingly, Andreas Halvorsen’s Viking Global said goodbye to the largest stake of the 450+ funds we key on, totaling about $62.1 million in call options.. Alexander Mitchell’s fund, Scopus Asset Management, also sold off its call options., about $30.6 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

How are insiders trading Eaton Corporation, PLC Ordinary Shares (NYSE:ETN)?

Insider buying made by high-level executives is at its handiest when the company in question has seen transactions within the past half-year. Over the last 180-day time period, Eaton Corporation, PLC Ordinary Shares (NYSE:ETN) has experienced zero unique insiders purchasing, and 8 insider sales (see the details of insider trades here).

We’ll go over the relationship between both of these indicators in other stocks similar to Eaton Corporation, PLC Ordinary Shares (NYSE:ETN). These stocks are REGAL-BELOIT CORPORATION (NYSE:RBC), Nidec Corporation (ADR) (NYSE:NJ), AMETEK, Inc. (NYSE:AME), Rockwell Automation (NYSE:ROK), and ABB Ltd (ADR) (NYSE:ABB). This group of stocks belong to the industrial electrical equipment industry and their market caps are closest to ETN’s market cap.

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