In this article we are going to use hedge fund sentiment as a tool and determine whether Emerson Electric Co. (NYSE:EMR) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is EMR stock a buy or sell? Emerson Electric Co. (NYSE:EMR) has seen an increase in activity from the world’s largest hedge funds lately. Emerson Electric Co. (NYSE:EMR) was in 46 hedge funds’ portfolios at the end of December. The all time high for this statistic is 44. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that EMR isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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 (or at the end of this article). With all of this in mind let’s take a glance at the new hedge fund action regarding Emerson Electric Co. (NYSE:EMR).
Do Hedge Funds Think EMR Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 28% from the third quarter of 2020. By comparison, 41 hedge funds held shares or bullish call options in EMR a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Emerson Electric Co. (NYSE:EMR), with a stake worth $241.6 million reported as of the end of December. Trailing Citadel Investment Group was Adage Capital Management, which amassed a stake valued at $223.7 million. AQR Capital Management, Appaloosa Management LP, 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 Albar Capital allocated the biggest weight to Emerson Electric Co. (NYSE:EMR), around 3.55% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, setting aside 2.4 percent of its 13F equity portfolio to EMR.
Now, key hedge funds have jumped into Emerson Electric Co. (NYSE:EMR) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the most outsized position in Emerson Electric Co. (NYSE:EMR). Balyasny Asset Management had $60.4 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $47.2 million position during the quarter. The following funds were also among the new EMR investors: Michael Cowley’s Sandbar Asset Management, John Murphy’s Levin Easterly Partners, and Alexander Mitchell’s Scopus Asset Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Emerson Electric Co. (NYSE:EMR) but similarly valued. We will take a look at Ambev SA (NYSE:ABEV), Newmont Corporation (NYSE:NEM), Eaton Corporation plc (NYSE:ETN), Relx PLC (NYSE:RELX), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Canadian Pacific Railway Limited (NYSE:CP), and Kimberly Clark Corporation (NYSE:KMB). This group of stocks’ market caps are closest to EMR’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 38.6 hedge funds with bullish positions and the average amount invested in these stocks was $1813 million. That figure was $1044 million in EMR’s case. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is the most popular stock in this table. On the other hand Relx PLC (NYSE:RELX) is the least popular one with only 8 bullish hedge fund positions. Emerson Electric Co. (NYSE:EMR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EMR is 62.6. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on EMR as the stock returned 10.8% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.