We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Emerald Expositions Events, Inc. (NYSE:EEX).
Emerald Expositions Events, Inc. (NYSE:EEX) has experienced an increase in enthusiasm from smart money lately. EEX was in 14 hedge funds’ portfolios at the end of the third quarter of 2019. There were 7 hedge funds in our database with EEX positions at the end of the previous quarter. Our calculations also showed that EEX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Paul Tudor Jones of Tudor Investment Corp
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the latest hedge fund action surrounding Emerald Expositions Events, Inc. (NYSE:EEX).
How are hedge funds trading Emerald Expositions Events, Inc. (NYSE:EEX)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EEX over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Select Equity Group held the most valuable stake in Emerald Expositions Events, Inc. (NYSE:EEX), which was worth $3.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $2.4 million worth of shares. D E Shaw, Winton Capital Management, and Millennium 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 Select Equity Group allocated the biggest weight to Emerald Expositions Events, Inc. (NYSE:EEX), around 0.02% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to EEX.
As industrywide interest jumped, key money managers have been driving this bullishness. Renaissance Technologies, established the biggest position in Emerald Expositions Events, Inc. (NYSE:EEX). Renaissance Technologies had $2.4 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $1 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Minhua Zhang’s Weld Capital Management.
Let’s now review hedge fund activity in other stocks similar to Emerald Expositions Events, Inc. (NYSE:EEX). These stocks are United Financial Bancorp, Inc. (NASDAQ:UBNK), Axsome Therapeutics, Inc. (NASDAQ:AXSM), NextDecade Corporation (NASDAQ:NEXT), and Capstead Mortgage Corporation (NYSE:CMO). This group of stocks’ market valuations are similar to EEX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UBNK | 14 | 86797 | 5 |
| AXSM | 15 | 76029 | -1 |
| NEXT | 7 | 510135 | -2 |
| CMO | 9 | 32875 | 0 |
| Average | 11.25 | 176459 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $176 million. That figure was $12 million in EEX’s case. Axsome Therapeutics, Inc. (NASDAQ:AXSM) is the most popular stock in this table. On the other hand NextDecade Corporation (NASDAQ:NEXT) is the least popular one with only 7 bullish hedge fund positions. Emerald Expositions Events, Inc. (NYSE:EEX) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately EEX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EEX were disappointed as the stock returned 3.7% during the fourth quarter (through the end of November) 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.
Disclosure: None. This article was originally published at Insider Monkey.
