The Estee Lauder Companies Inc (EL): Hedge Fund Sentiment Near Its All Time High

How do we determine whether The Estee Lauder Companies Inc (NYSE:EL) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Is The Estee Lauder Companies Inc (NYSE:EL) undervalued? Prominent investors are in a pessimistic mood at the margin but the hedge fund sentiment towards the stock is still near its all time high. The number of long hedge fund positions dropped by 3 in recent months. Our calculations also showed that EL isn’t among the 30 most popular stocks among hedge funds (see the video below). EL was in 36 hedge funds’ portfolios at the end of June. There were 39 hedge funds in our database with EL 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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. Let’s take a peek at the key hedge fund action encompassing The Estee Lauder Companies Inc (NYSE:EL).

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

Heading into the third quarter of 2019, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the first quarter of 2019. By comparison, 35 hedge funds held shares or bullish call options in EL a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Bruce Kovner, Caxton Associates LP

Among these funds, Renaissance Technologies held the most valuable stake in The Estee Lauder Companies Inc (NYSE:EL), which was worth $405.7 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $384.3 million worth of shares. Moreover, Melvin Capital Management, Arrowstreet Capital, and Adage Capital Management were also bullish on The Estee Lauder Companies Inc (NYSE:EL), allocating a large percentage of their portfolios to this stock.

Due to the fact that The Estee Lauder Companies Inc (NYSE:EL) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of money managers who were dropping their positions entirely by the end of the second quarter. Interestingly, Israel Englander’s Millennium Management cut the largest stake of the 750 funds tracked by Insider Monkey, totaling about $147.7 million in stock, and Jeffrey Talpins’s Element Capital Management was right behind this move, as the fund cut about $29.3 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 3 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks similar to The Estee Lauder Companies Inc (NYSE:EL). These stocks are Equinor ASA (NYSE:EQNR), Celgene Corporation (NASDAQ:CELG), The Bank of Nova Scotia (NYSE:BNS), and Duke Energy Corporation (NYSE:DUK). All of these stocks’ market caps resemble EL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EQNR 13 386566 3
CELG 88 10570280 -13
BNS 16 536678 2
DUK 32 1626108 6
Average 37.25 3279908 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $3280 million. That figure was $1355 million in EL’s case. Celgene Corporation (NASDAQ:CELG) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 13 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 calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on EL as the stock returned 8.9% during the same time frame and outperformed the market by an even larger margin.

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