Is The Estee Lauder Companies Inc (EL) A Good Stock To Buy?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards The Estee Lauder Companies Inc (NYSE:EL) changed recently.

Is EL a good stock to buy? The Estee Lauder Companies Inc (NYSE:EL) was in 50 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 59. EL has experienced a decrease in hedge fund interest recently. There were 59 hedge funds in our database with EL positions at the end of the first quarter. Our calculations also showed that EL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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Dan Loeb of Third Point

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

Heading into the third quarter of 2021, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EL over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in The Estee Lauder Companies Inc (NYSE:EL) was held by Fundsmith LLP, which reported holding $2172.6 million worth of stock at the end of June. It was followed by Ako Capital with a $442.6 million position. Other investors bullish on the company included Third Point, AQR Capital Management, and Bridgewater Associates. In terms of the portfolio weights assigned to each position Keywise Capital Management allocated the biggest weight to The Estee Lauder Companies Inc (NYSE:EL), around 8.75% of its 13F portfolio. Fundsmith LLP is also relatively very bullish on the stock, designating 6.02 percent of its 13F equity portfolio to EL.

Since The Estee Lauder Companies Inc (NYSE:EL) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds that slashed their full holdings heading into Q3. Intriguingly, Steve Cohen’s Point72 Asset Management cut the largest stake of all the hedgies tracked by Insider Monkey, worth an estimated $73.2 million in stock. Larry Chen and Terry Zhang’s fund, Tairen Capital, also said goodbye to its stock, about $46.5 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 9 funds heading into Q3.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The Estee Lauder Companies Inc (NYSE:EL) but similarly valued. We will take a look at 3M Company (NYSE:MMM), Advanced Micro Devices, Inc. (NASDAQ:AMD), Zoom Video Communications, Inc. (NASDAQ:ZM), Diageo plc (NYSE:DEO), Square, Inc. (NYSE:SQ), Deere & Company (NYSE:DE), and CVS Health Corporation (NYSE:CVS). This group of stocks’ market caps resemble EL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MMM 42 1582540 1
AMD 63 4610011 1
ZM 59 8480712 5
DEO 20 891081 -2
SQ 94 10327761 2
DE 52 2173962 1
CVS 67 1355477 5
Average 56.7 4203078 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 56.7 hedge funds with bullish positions and the average amount invested in these stocks was $4203 million. That figure was $4130 million in EL’s case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 20 bullish hedge fund positions. The Estee Lauder Companies Inc (NYSE:EL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EL is 41.7. 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. 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 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 22.9% in 2021 through October 1st and surpassed the market again by 5.6 percentage points. Unfortunately EL wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); EL investors were disappointed as the stock returned -2.2% since the end of June (through 10/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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