Is Eastman Chemical Company (EMN) A Good Stock To Buy?

After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 28. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Eastman Chemical Company (NYSE:EMN).

Eastman Chemical Company (NYSE:EMN) was in 23 hedge funds’ portfolios at the end of the second quarter of 2019. EMN shareholders have witnessed a decrease in hedge fund sentiment lately. There were 30 hedge funds in our database with EMN holdings at the end of the previous quarter. Our calculations also showed that EMN isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most shareholders, hedge funds are viewed as worthless, outdated investment tools of yesteryear. While there are over 8000 funds with their doors open today, Our researchers hone in on the upper echelon of this group, about 750 funds. These hedge fund managers preside over the majority of the hedge fund industry’s total asset base, and by monitoring their highest performing equity investments, Insider Monkey has discovered several investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

Alexander Roepers, Atlantic Investment Management

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to check out the key hedge fund action regarding Eastman Chemical Company (NYSE:EMN).

How have hedgies been trading Eastman Chemical Company (NYSE:EMN)?

At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the previous quarter. By comparison, 27 hedge funds held shares or bullish call options in EMN 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.


Of the funds tracked by Insider Monkey, Diamond Hill Capital, managed by Ric Dillon, holds the biggest position in Eastman Chemical Company (NYSE:EMN). Diamond Hill Capital has a $106 million position in the stock, comprising 0.6% of its 13F portfolio. On Diamond Hill Capital’s heels is Atlantic Investment Management, led by Alexander Roepers, holding a $59.8 million position; 16.1% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism include Thomas E. Claugus’s GMT Capital, Cliff Asness’s AQR Capital Management and D. E. Shaw’s D E Shaw.

Since Eastman Chemical Company (NYSE:EMN) has faced falling interest from the aggregate hedge fund industry, logic holds that there is a sect of funds who sold off their entire stakes in the second quarter. Intriguingly, Jonathan Barrett and Paul Segal’s Luminus Management said goodbye to the largest investment of the “upper crust” of funds watched by Insider Monkey, worth about $10.1 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund cut about $6.7 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 7 funds in the second quarter.

Let’s go over hedge fund activity in other stocks similar to Eastman Chemical Company (NYSE:EMN). We will take a look at Pinnacle West Capital Corporation (NYSE:PNW), Wheaton Precious Metals Corp. (NYSE:WPM), Roku, Inc. (NASDAQ:ROKU), and Jack Henry & Associates, Inc. (NASDAQ:JKHY). This group of stocks’ market values are similar to EMN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PNW 23 683747 -1
WPM 19 291052 0
ROKU 33 550484 0
JKHY 18 132769 1
Average 23.25 414513 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $415 million. That figure was $380 million in EMN’s case. Roku, Inc. (NASDAQ:ROKU) is the most popular stock in this table. On the other hand Jack Henry & Associates, Inc. (NASDAQ:JKHY) is the least popular one with only 18 bullish hedge fund positions. Eastman Chemical Company (NYSE:EMN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately EMN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EMN investors were disappointed as the stock returned -4.3% during the third quarter 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 in 2019.

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