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Did Hedge Funds Drop The Ball On Emcor Group Inc (EME) ?

Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter. NASDAQ and Russell 2000 indices were already in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points in the fourth quarter. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Emcor Group Inc (NYSE:EME).

Emcor Group Inc (NYSE:EME) has experienced a decrease in hedge fund interest recently. Our calculations also showed that eme isn’t among the 30 most popular stocks among hedge funds.

At the moment there are dozens of gauges stock traders use to evaluate publicly traded companies. A couple of the most innovative gauges are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the best investment managers can outclass their index-focused peers by a healthy margin (see the details here).

Clint Carlson, Carlson Capital

We’re going to view the recent hedge fund action encompassing Emcor Group Inc (NYSE:EME).

What have hedge funds been doing with Emcor Group Inc (NYSE:EME)?

At Q4’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EME over the last 14 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

No of Hedge Funds With EME Positions

Among these funds, AQR Capital Management held the most valuable stake in Emcor Group Inc (NYSE:EME), which was worth $48.9 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $29.6 million worth of shares. Moreover, Carlson Capital, GLG Partners, and Renaissance Technologies were also bullish on Emcor Group Inc (NYSE:EME), allocating a large percentage of their portfolios to this stock.

Due to the fact that Emcor Group Inc (NYSE:EME) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies that elected to cut their entire stakes by the end of the third quarter. It’s worth mentioning that Matthew Tewksbury’s Stevens Capital Management cut the largest position of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $1.4 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund dropped about $1.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Emcor Group Inc (NYSE:EME). We will take a look at Ryman Hospitality Properties, Inc. (NYSE:RHP), Penske Automotive Group, Inc. (NYSE:PAG), American National Insurance Company (NASDAQ:ANAT), and J2 Global Inc (NASDAQ:JCOM). This group of stocks’ market values resemble EME’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RHP 18 407097 -6
PAG 23 97186 3
ANAT 15 37536 2
JCOM 17 203141 0
Average 18.25 186240 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $195 million in EME’s case. Penske Automotive Group, Inc. (NYSE:PAG) is the most popular stock in this table. On the other hand American National Insurance Company (NASDAQ:ANAT) is the least popular one with only 15 bullish hedge fund positions. Emcor Group Inc (NYSE:EME) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on EME as the stock returned 34.1% and outperformed the market by an even larger margin.

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

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