Is Eastman Chemical Company (NYSE:EMN) undervalued? Prominent investors are reducing their bets on the stock. The number of long hedge fund bets dropped by 8 recently.
According to most market participants, hedge funds are seen as slow, outdated financial vehicles of yesteryear. While there are over 8000 funds in operation at present, we at Insider Monkey hone in on the aristocrats of this club, close to 450 funds. It is estimated that this group oversees most of all hedge funds’ total asset base, and by paying attention to their highest performing stock picks, we have identified a number of investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year 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 trumped the S&P 500 index by 23.3 percentage points in 8 months (see the details here).
Equally as important, optimistic insider trading activity is another way to parse down the stock market universe. As the old adage goes: there are a variety of reasons for an upper level exec to sell shares of his or her company, but just one, very clear reason why they would buy. Plenty of academic studies have demonstrated the market-beating potential of this method if you understand what to do (learn more here).
With all of this in mind, it’s important to take a look at the recent action surrounding Eastman Chemical Company (NYSE:EMN).
Hedge fund activity in Eastman Chemical Company (NYSE:EMN)
At Q1’s end, a total of 40 of the hedge funds we track were bullish in this stock, a change of -17% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably.
According to our comprehensive database, Iridian Asset Management, managed by David Cohen and Harold Levy, holds the most valuable position in Eastman Chemical Company (NYSE:EMN). Iridian Asset Management has a $290.9 million position in the stock, comprising 4.3% of its 13F portfolio. Sitting at the No. 2 spot is Andreas Halvorsen of Viking Global, with a $219.6 million position; 1.3% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism include Daniel S. Och’s OZ Management, Jean-Marie Eveillard’s First Eagle Investment Management and Doug Silverman and Alexander Klabin’s Senator Investment Group.
Seeing as Eastman Chemical Company (NYSE:EMN) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds who sold off their full holdings last quarter. It’s worth mentioning that Sean Cullinan’s Point State Capital sold off the biggest investment of the “upper crust” of funds we monitor, valued at about $88.2 million in stock.. Ken Heebner’s fund, Capital Growth Management, also cut its stock, about $15.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 8 funds last quarter.
What do corporate executives and insiders think about Eastman Chemical Company (NYSE:EMN)?
Insider trading activity, especially when it’s bullish, is at its handiest when the company in question has seen transactions within the past half-year. Over the latest six-month time period, Eastman Chemical Company (NYSE:EMN) has experienced zero unique insiders purchasing, and 8 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to Eastman Chemical Company (NYSE:EMN). These stocks are Ashland Inc. (NYSE:ASH), Air Products & Chemicals, Inc. (NYSE:APD), Celanese Corporation (NYSE:CE), FMC Corp (NYSE:FMC), and Sociedad Quimica y Minera (ADR) (NYSE:SQM). This group of stocks belong to the chemicals – major diversified industry and their market caps resemble EMN’s market cap.