Here is What Hedge Funds Think About The Eastern Company (EML)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of The Eastern Company (NASDAQ:EML) based on that data.

The Eastern Company (NASDAQ:EML) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of March. Our calculations also showed that EML isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Genie Energy Ltd (NYSE:GNE), COMSovereign Holding Corp. (NASDAQ:COMS), and LMP Automotive Holdings, Inc. (NASDAQ:LMPX) to gather more data points.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a look at the recent hedge fund action regarding The Eastern Company (NASDAQ:EML).

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

At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EML over the last 23 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

More specifically, Barington Capital Group was the largest shareholder of The Eastern Company (NASDAQ:EML), with a stake worth $15.6 million reported as of the end of March. Trailing Barington Capital Group was GAMCO Investors, which amassed a stake valued at $14.1 million. Minerva Advisors, Renaissance Technologies, and Ancora Advisors 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 Barington Capital Group allocated the biggest weight to The Eastern Company (NASDAQ:EML), around 16.48% of its 13F portfolio. Minerva Advisors is also relatively very bullish on the stock, setting aside 4.72 percent of its 13F equity portfolio to EML.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s also examine hedge fund activity in other stocks similar to The Eastern Company (NASDAQ:EML). These stocks are Genie Energy Ltd (NYSE:GNE), COMSovereign Holding Corp. (NASDAQ:COMS), LMP Automotive Holdings, Inc. (NASDAQ:LMPX), Potbelly Corp (NASDAQ:PBPB), Enzo Biochem, Inc. (NYSE:ENZ), Qilian International Holding Group Limited (NASDAQ:QLI), and Eagle Bancorp Montana Inc (NASDAQ:EBMT). This group of stocks’ market caps match EML’s market cap.

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As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $46 million in EML’s case. Potbelly Corp (NASDAQ:PBPB) is the most popular stock in this table. On the other hand LMP Automotive Holdings, Inc. (NASDAQ:LMPX) is the least popular one with only 2 bullish hedge fund positions. The Eastern Company (NASDAQ:EML) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EML is 45.2. 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. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on EML as the stock returned 17% since the end of the first quarter (through 6/18) and outperformed the market by an even larger margin.

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