Should I Avoid The Estee Lauder Companies Inc (EL)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30th, so let’s proceed with the discussion of the hedge fund sentiment on The Estee Lauder Companies Inc (NYSE:EL).

Is The Estee Lauder Companies Inc (NYSE:EL) the right pick for your portfolio? Prominent investors were getting less bullish. The number of bullish hedge fund positions dropped by 1 in recent months. The Estee Lauder Companies Inc (NYSE:EL) was in 49 hedge funds’ portfolios at the end of September. The all time high for this statistic is 59. Our calculations also showed that EL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind we’re going to review the new hedge fund action encompassing The Estee Lauder Companies Inc (NYSE:EL).


Dan Loeb of Third Point

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

Heading into the fourth quarter of 2021, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from one quarter earlier. By comparison, 46 hedge funds held shares or bullish call options in EL a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Fundsmith LLP was the largest shareholder of The Estee Lauder Companies Inc (NYSE:EL), with a stake worth $2049 million reported as of the end of September. Trailing Fundsmith LLP was Ako Capital, which amassed a stake valued at $360.8 million. Third Point, AQR Capital Management, and Bridgewater Associates 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 Fundsmith LLP allocated the biggest weight to The Estee Lauder Companies Inc (NYSE:EL), around 5.66% of its 13F portfolio. Sustainable Insight Capital Management is also relatively very bullish on the stock, designating 4.59 percent of its 13F equity portfolio to EL.

Because The Estee Lauder Companies Inc (NYSE:EL) has faced falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of money managers that slashed their entire stakes by the end of the third quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the biggest investment of the 750 funds followed by Insider Monkey, worth close to $39.1 million in stock. Amir Mokari’s fund, Emerson Point Capital, also cut its stock, about $6.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to The Estee Lauder Companies Inc (NYSE:EL). We will take a look at Rio Tinto Group (NYSE:RIO), HSBC Holdings plc (NYSE:HSBC), Caterpillar Inc. (NYSE:CAT), Deere & Company (NYSE:DE), S&P Global Inc. (NYSE:SPGI), 3M Company (NYSE:MMM), and Airbnb, Inc. (NASDAQ:ABNB). This group of stocks’ market valuations are similar to EL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RIO 20 1330364 -1
HSBC 10 196426 -1
CAT 46 4778511 -16
DE 54 2530736 2
SPGI 78 7036868 7
MMM 46 1624838 4
ABNB 58 2712558 0
Average 44.6 2887186 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.6 hedge funds with bullish positions and the average amount invested in these stocks was $2887 million. That figure was $4137 million in EL’s case. S&P Global Inc. (NYSE:SPGI) is the most popular stock in this table. On the other hand HSBC Holdings plc (NYSE:HSBC) 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. Our overall hedge fund sentiment score for EL is 57.6. 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 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on EL as the stock returned 10.9% since the end of Q3 (through 11/30) 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.