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Hedge Funds Are Betting On Emcor Group Inc (EME)

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Emcor Group Inc (NYSE:EME) based on that data.

Emcor Group Inc (NYSE:EME) was in 20 hedge funds’ portfolios at the end of the third quarter of 2018. EME investors should be aware of an increase in enthusiasm from smart money of late. There were 17 hedge funds in our database with EME positions at the end of the previous quarter. Our calculations also showed that EME isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Phill Gross, Adage Capital Management

We’re going to go over the key hedge fund action surrounding Emcor Group Inc (NYSE:EME).

What does the smart money think about Emcor Group Inc (NYSE:EME)?

At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the second quarter of 2018. By comparison, 24 hedge funds held shares or bullish call options in EME heading into this year. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

EME_dec2018

The largest stake in Emcor Group Inc (NYSE:EME) was held by AQR Capital Management, which reported holding $82.7 million worth of stock at the end of September. It was followed by GLG Partners with a $27 million position. Other investors bullish on the company included Adage Capital Management, Renaissance Technologies, and Impax Asset Management.

Consequently, key money managers have jumped into Emcor Group Inc (NYSE:EME) headfirst. Impax Asset Management, managed by Ian Simm, created the most valuable position in Emcor Group Inc (NYSE:EME). Impax Asset Management had $13.2 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $1.4 million position during the quarter. The other funds with new positions in the stock are Michael Platt and William Reeves’s BlueCrest Capital Mgmt. and Thomas Bailard’s Bailard Inc.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Emcor Group Inc (NYSE:EME) but similarly valued. We will take a look at Proto Labs Inc (NYSE:PRLB), The Scotts Miracle-Gro Company (NYSE:SMG), Graphic Packaging Holding Company (NYSE:GPK), and Essent Group Ltd (NYSE:ESNT). All of these stocks’ market caps resemble EME’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRLB 5 11266 -3
SMG 23 280789 2
GPK 25 771297 -2
ESNT 30 463408 2
Average 20.75 381690 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $382 million. That figure was $231 million in EME’s case. Essent Group Ltd (NYSE:ESNT) is the most popular stock in this table. On the other hand Proto Labs Inc (NYSE:PRLB) is the least popular one with only 5 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ESNT might be a better candidate to consider a long position.

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

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