Is The Estee Lauder Companies Inc (EL) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider The Estee Lauder Companies Inc (NYSE:EL) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

The Estee Lauder Companies Inc (NYSE:EL) shareholders have witnessed an increase in hedge fund interest lately. Our calculations also showed that EL isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to the beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


Cliff Asness of AQR Capital Management

Let’s check out the new hedge fund action surrounding The Estee Lauder Companies Inc (NYSE:EL).

Hedge fund activity in The Estee Lauder Companies Inc (NYSE:EL)

Heading into the fourth quarter of 2018, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards EL over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


More specifically, AQR Capital Management was the largest shareholder of The Estee Lauder Companies Inc (NYSE:EL), with a stake worth $551.4 million reported as of the end of September. Trailing AQR Capital Management was Arrowstreet Capital, which amassed a stake valued at $249.9 million. Renaissance Technologies, Citadel Investment Group, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.

As one would reasonably expect, key hedge funds have jumped into The Estee Lauder Companies Inc (NYSE:EL) headfirst. Holocene Advisors, managed by Brandon Haley, assembled the largest position in The Estee Lauder Companies Inc (NYSE:EL). Holocene Advisors had $35.9 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also initiated a $15.4 million position during the quarter. The other funds with brand new EL positions are Ian Simm’s Impax Asset Management, Matthew Hulsizer’s PEAK6 Capital Management, and Robert B. Gillam’s McKinley Capital Management.

Let’s go over 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 Boston Scientific Corporation (NYSE:BSX), America Movil SAB de CV (NYSE:AMX), Honda Motor Co Ltd (NYSE:HMC), and Bank of Montreal (NYSE:BMO). This group of stocks’ market caps are similar to EL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BSX 45 2420957 3
AMX 10 265643 0
HMC 11 117617 -2
BMO 13 658815 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $866 million. That figure was $1.46 billion in EL’s case. Boston Scientific Corporation (NYSE:BSX) is the most popular stock in this table. On the other hand America Movil SAB de CV (NYSE:AMX) is the least popular one with only 10 bullish hedge fund positions. The Estee Lauder Companies Inc (NYSE:EL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BSX might be a better candidate to consider a long position.

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