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Should You Buy Estee Lauder Companies Inc (EL)?

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After a lengthy stretch of outperformance, small-cap stocks suffered from July 2015 through June 2016, as heightened global economic fears led investors to flee to the safe havens of large-cap stocks and other instruments. Those stocks outperformed small-caps by about 10 percentage points during that time, with small-cap healthcare stocks being particularly hard hit. However, the tide has since turned in a big way, as evidenced by small-caps toppling their large-cap peers by 5 percentage points in the third quarter, and by another 5 percentage points in the first seven weeks of the fourth quarter. In this article, we’ll analyze how this shift affected hedge funds’ Q3 trading of Estee Lauder Companies Inc (NYSE:EL) and see how the stock is affected by the recent hedge fund activity.

Estee Lauder Companies Inc (NYSE:EL) was in 29 hedge funds’ portfolios at the end of the third quarter of 2016. EL investors should pay attention to an increase in hedge fund sentiment lately. There were 25 hedge funds in our database with EL positions at the end of the previous quarter. At the end of this article we will also compare EL to other stocks including Emerson Electric Co. (NYSE:EMR), Charles Schwab Corp (NYSE:SCHW), and Korea Electric Power Corporation (ADR) (NYSE:KEP) to get a better sense of its popularity.

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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

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With all of this in mind, we’re going to view the key action regarding Estee Lauder Companies Inc (NYSE:EL).

Hedge fund activity in Estee Lauder Companies Inc (NYSE:EL)

At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 16% from the previous quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
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According to Insider Monkey’s hedge fund database, Paul Marshall and Ian Wace’s Marshall Wace LLP has the biggest position in Estee Lauder Companies Inc (NYSE:EL), worth close to $171.8 million and corresponding to 1.2% of its total 13F portfolio. The second largest stake is held by Jim Simons’ Renaissance Technologies holding a $124 million position; 0.2% of its 13F portfolio is allocated to the company. Other peers that hold long positions include Cliff Asness’s AQR Capital Management, Alexander Mitchell’s Scopus Asset Management and Ken Griffin’s Citadel Investment Group.

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