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Hedge Funds’ Favorite Industrial Stocks Going Into 2016

The fourth quarter of last year came as a respite for most equity investors who saw the value of their holdings plummet quite significantly amid a rout in the overall market during the third quarter. Among the sectors which bounced back with great zeal and in that process surpassed even the S&P 500 during the October-December period was Industrials. While the S&P 500 ended fourth quarter up by 6.45%, the S&P 500 Industrials returned 7.35% during the same period. Industrials also enjoy the distinction of being one of the most popular sectors among value-focused investors. Since high-flying biotech or tech stocks trade always at a premium relative to their industrial counterparts, investors who prefer stable earnings and growth over the long-term generally avoid them. However, in spite of the advantages the sector offers, due to a large number of companies that come under the umbrella of industrials, investors usually find it very hard to select the right industrials stocks for their portfolios.

To make their stock selection easier, we at Insider Monkey routinely come up with the list of most popular stocks industrial stocks among hedge funds. This time, the top five industrial stocks that made it to our list for the fourth quarter had the backing of at least 46 prominent investors among the 800+ we cover and a minimum aggregate value of investors’ holding in them of $1.89 billion. We would also like to point out that the most popular industrial stocks among hedge funds at the end of fourth quarter was Precision Castparts Corp. (PCP). However, since it got delisted recently after getting acquired by Berkshire Hathaway and an investor can no longer buy its shares, we have decided to omit it from our list.

Historically the most popular stocks among hedge funds outperform the market by a decent margin. The magnitude of outperformance is actually inversely related

#5 Sealed Air Corp (NYSE:SEE)

– Investors with Long Positions (as of December 31): 46

– Aggregate Value of Investors’ Holdings (as of December 31): $1.9 Billion

The ownership of Sealed Air Corp (NYSE:SEE) among hedge funds covered by us declined by three and the aggregate value of investors’ holding in it also suffered a decline of $293 million during the fourth quarter. However, in aggregate, these investors still owned 21.60% of all outstanding shares of the company. Due to the rally Sealed Air Corp (NYSE:SEE)’s stock has seen in the last few days after the company reported its fourth quarter results, it is currently trading up 4% year-to-date. While the Street had estimated the company to report EPS of $0.50 on revenue of $1.78 billion for the quarter, Sealed Air Corp declared EPS of $0.76 on revenue of $1.75 billion. On February 19, analysts at Bank of America upgraded the stock to a ‘Buy’ from ‘Neutral’ while keeping their price target on it unchanged at $52. Jeff Lignelli‘s Incline Global Management was one of the hedge funds that initiated a stake in the company during the fourth quarter; it held 502,380 shares of Sealed Air Corp, as of December 31.

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