Hedge Funds Are Buying Element Solutions Inc. (ESI)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Element Solutions Inc. (NYSE:ESI) in this article.

Is Element Solutions Inc. (NYSE:ESI) the right investment to pursue these days? Money managers were taking an optimistic view. The number of long hedge fund bets advanced by 5 lately. Element Solutions Inc. (NYSE:ESI) was in 28 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 40. Our calculations also showed that ESI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a look at the new hedge fund action encompassing Element Solutions Inc. (NYSE:ESI).

Do Hedge Funds Think ESI Is A Good Stock To Buy Now?

At third quarter’s end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the previous quarter. By comparison, 35 hedge funds held shares or bullish call options in ESI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Gates Capital Management held the most valuable stake in Element Solutions Inc. (NYSE:ESI), which was worth $218.5 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $70 million worth of shares. Glenview Capital, Locust Wood Capital Advisers, and Iridian Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Gates Capital Management allocated the biggest weight to Element Solutions Inc. (NYSE:ESI), around 6.01% of its 13F portfolio. Scoggin is also relatively very bullish on the stock, designating 5.75 percent of its 13F equity portfolio to ESI.

As one would reasonably expect, some big names were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the biggest position in Element Solutions Inc. (NYSE:ESI). Balyasny Asset Management had $31.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $20.8 million position during the quarter. The other funds with brand new ESI positions are Javier Velazquez’s Albar Capital, Curtis Schenker and Craig Effron’s Scoggin, and Robert Vincent McHugh’s Jade Capital Advisors.

Let’s also examine hedge fund activity in other stocks similar to Element Solutions Inc. (NYSE:ESI). We will take a look at Squarespace Inc. (NYSE:SQSP), TFS Financial Corporation (NASDAQ:TFSL), Evercore Inc. (NYSE:EVR), Glacier Bancorp, Inc. (NASDAQ:GBCI), Twist Bioscience Corporation (NASDAQ:TWST), Newegg Commerce Inc. (NASDAQ:NEGG), and Iridium Communications Inc. (NASDAQ:IRDM). This group of stocks’ market valuations are similar to ESI’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.4 hedge funds with bullish positions and the average amount invested in these stocks was $307 million. That figure was $650 million in ESI’s case. Evercore Inc. (NYSE:EVR) is the most popular stock in this table. On the other hand Newegg Commerce Inc. (NASDAQ:NEGG) is the least popular one with only 5 bullish hedge fund positions. Element Solutions Inc. (NYSE:ESI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ESI is 73.6. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately ESI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ESI were disappointed as the stock returned 8% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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