The Eastern Company (EML): Hedge Funds Cautiously Watching

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 at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of The Eastern Company (NASDAQ:EML).

The Eastern Company (NASDAQ:EML) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of March. At the end of this article we will also compare EML to other stocks including Conn’s, Inc. (NASDAQ:CONN), Information Services Group, Inc. (NASDAQ:III), and Bel Fuse, Inc. (NASDAQ:BELFB) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most shareholders, hedge funds are seen as unimportant, outdated financial tools of the past. While there are more than 8000 funds with their doors open today, We look at the leaders of this club, about 850 funds. These money managers oversee the lion’s share of all hedge funds’ total asset base, and by watching their first-class equity investments, Insider Monkey has unearthed many investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

James Mitarotonda Barington Capital

James A. Mitarotonda of Barington Capital Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the fresh hedge fund action regarding The Eastern Company (NASDAQ:EML).

What does smart money think about The Eastern Company (NASDAQ:EML)?

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards EML over the last 18 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 Eastern Company (NASDAQ:EML) was held by Barington Capital Group, which reported holding $11.3 million worth of stock at the end of September. It was followed by GAMCO Investors with a $10.9 million position. Other investors bullish on the company included Minerva Advisors, Renaissance Technologies, and Ancora Advisors. In terms of the portfolio weights assigned to each position Barington Capital Group allocated the biggest weight to The Eastern Company (NASDAQ:EML), around 26.18% of its 13F portfolio. Minerva Advisors is also relatively very bullish on the stock, setting aside 4.88 percent of its 13F equity portfolio to EML.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the first quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The Eastern Company (NASDAQ:EML) but similarly valued. These stocks are Conn’s, Inc. (NASDAQ:CONN), Information Services Group, Inc. (NASDAQ:III), Bel Fuse, Inc. (NASDAQ:BELFB), and Avianca Holdings SA (NYSE:AVH). This group of stocks’ market caps match EML’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CONN 18 8611 2
III 7 21552 1
BELFB 7 11172 0
AVH 4 1570 1
Average 9 10726 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $34 million in EML’s case. Conn’s, Inc. (NASDAQ:CONN) is the most popular stock in this table. On the other hand Avianca Holdings SA (NYSE:AVH) is the least popular one with only 4 bullish hedge fund positions. The Eastern Company (NASDAQ:EML) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately EML wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); EML investors were disappointed as the stock returned -1.4% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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