We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards Emcor Group Inc (NYSE:EME).
Emcor Group Inc (NYSE:EME) was in 29 hedge funds’ portfolios at the end of the fourth quarter of 2019. EME investors should be aware of an increase in hedge fund sentiment of late. There were 28 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 (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the key hedge fund action regarding Emcor Group Inc (NYSE:EME).
How are hedge funds trading Emcor Group Inc (NYSE:EME)?
At Q4’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the third quarter of 2019. On the other hand, there were a total of 18 hedge funds with a bullish position in EME a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Emcor Group Inc (NYSE:EME), which was worth $99.5 million at the end of the third quarter. On the second spot was GLG Partners which amassed $47.1 million worth of shares. Carlson Capital, Arrowstreet Capital, and Impax 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 Carlson Capital allocated the biggest weight to Emcor Group Inc (NYSE:EME), around 0.61% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, setting aside 0.6 percent of its 13F equity portfolio to EME.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Sciencast Management, managed by Qing Li, initiated the most valuable position in Emcor Group Inc (NYSE:EME). Sciencast Management had $0.9 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $0.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Minhua Zhang’s Weld Capital Management, Peter Muller’s PDT Partners, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s go over 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 Graphic Packaging Holding Company (NYSE:GPK), Black Hills Corporation (NYSE:BKH), Carter’s, Inc. (NYSE:CRI), and Repligen Corporation (NASDAQ:RGEN). This group of stocks’ market valuations match EME’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GPK | 39 | 550850 | 3 |
| BKH | 24 | 200216 | 3 |
| CRI | 21 | 263204 | -4 |
| RGEN | 23 | 247507 | -3 |
| Average | 26.75 | 315444 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $315 million. That figure was $238 million in EME’s case. Graphic Packaging Holding Company (NYSE:GPK) is the most popular stock in this table. On the other hand Carter’s, Inc. (NYSE:CRI) is the least popular one with only 21 bullish hedge fund positions. Emcor Group Inc (NYSE:EME) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately EME wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EME were disappointed as the stock returned -36.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
