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Is ESCO Technologies Inc. (ESE) A Good Stock To Buy?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is ESCO Technologies Inc. (NYSE:ESE) a buy, sell, or hold? Investors who are in the know are getting less optimistic. The number of long hedge fund bets went down by 3 in recent months. Our calculations also showed that ESE isn’t among the 30 most popular stocks among hedge funds (see the video below). ESE was in 4 hedge funds’ portfolios at the end of June. There were 7 hedge funds in our database with ESE holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

AQR CAPITAL MANAGEMENT

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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 new hedge fund action regarding ESCO Technologies Inc. (NYSE:ESE).

What does smart money think about ESCO Technologies Inc. (NYSE:ESE)?

At Q2’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -43% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ESE over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ESE Positions

According to Insider Monkey’s hedge fund database, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in ESCO Technologies Inc. (NYSE:ESE), worth close to $1.5 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Millennium Management, managed by Israel Englander, which holds a $0.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that hold long positions encompass Cliff Asness’s AQR Capital Management, D. E. Shaw’s D E Shaw and .

Judging by the fact that ESCO Technologies Inc. (NYSE:ESE) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of money managers that elected to cut their full holdings in the second quarter. Intriguingly, Ken Griffin’s Citadel Investment Group dropped the largest investment of all the hedgies watched by Insider Monkey, worth about $1 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also sold off its stock, about $0.4 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds in the second quarter.

Let’s now review hedge fund activity in other stocks similar to ESCO Technologies Inc. (NYSE:ESE). These stocks are The RealReal, Inc. (NASDAQ:REAL), Mednax Inc. (NYSE:MD), SVMK Inc. (NASDAQ:SVMK), and Advanced Energy Industries, Inc. (NASDAQ:AEIS). All of these stocks’ market caps are closest to ESE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
REAL 33 101696 33
MD 18 269365 -5
SVMK 23 453141 3
AEIS 14 138830 -3
Average 22 240758 7

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $241 million. That figure was $3 million in ESE’s case. The RealReal, Inc. (NASDAQ:REAL) is the most popular stock in this table. On the other hand Advanced Energy Industries, Inc. (NASDAQ:AEIS) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks ESCO Technologies Inc. (NYSE:ESE) is even less popular than AEIS. Hedge funds dodged a bullet by taking a bearish stance towards ESE. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ESE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ESE investors were disappointed as the stock returned -3.6% 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.

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