Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Eaton Corporation plc (NYSE:ETN).
Is Eaton Corporation plc (NYSE:ETN) the right investment to pursue these days? The best stock pickers are turning less bullish. The number of bullish hedge fund bets went down by 5 lately. Our calculations also showed that ETN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). ETN was in 31 hedge funds' portfolios at the end of September. There were 36 hedge funds in our database with ETN positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most stock holders, hedge funds are perceived as slow, old financial vehicles of the past. While there are over 8000 funds in operation at the moment, Our researchers hone in on the masters of this club, around 750 funds. These money managers manage the majority of all hedge funds' total asset base, and by tracking their finest picks, Insider Monkey has unsheathed a few investment strategies that have historically outperformed Mr. Market. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_26092" align="aligncenter" width="482"] Joel Greenblatt of Gotham Asset Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to check out the latest hedge fund action encompassing Eaton Corporation plc (NYSE:ETN).
How are hedge funds trading Eaton Corporation plc (NYSE:ETN)?
Heading into the fourth quarter of 2019, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ETN over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the biggest position in Eaton Corporation plc (NYSE:ETN). AQR Capital Management has a $287.8 million position in the stock, comprising 0.3% of its 13F portfolio. The second most bullish fund manager is D E Shaw, led by David E. Shaw, holding a $29.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism consist of Joel Greenblatt's Gotham Asset Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Eaton Corporation plc (NYSE:ETN), around 1.13% of its portfolio. Ancora Advisors is also relatively very bullish on the stock, earmarking 0.6 percent of its 13F equity portfolio to ETN.
Because Eaton Corporation plc (NYSE:ETN) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of funds that decided to sell off their entire stakes heading into Q4. Intriguingly, Brandon Haley's Holocene Advisors dropped the biggest stake of all the hedgies followed by Insider Monkey, comprising about $58.4 million in stock, and Clint Carlson's Carlson Capital was right behind this move, as the fund sold off about $16.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds heading into Q4.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Eaton Corporation plc (NYSE:ETN) but similarly valued. We will take a look at Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), Humana Inc (NYSE:HUM), Yum! Brands, Inc. (NYSE:YUM), and Energy Transfer L.P. (NYSE:ET). This group of stocks' market values resemble ETN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BBVA,9,275548,2 HUM,61,3527353,-1 YUM,35,842106,5 ET,30,623109,1 Average,33.75,1317029,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.75 hedge funds with bullish positions and the average amount invested in these stocks was $1317 million. That figure was $464 million in ETN's case. Humana Inc (NYSE:HUM) is the most popular stock in this table. On the other hand Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA) is the least popular one with only 9 bullish hedge fund positions. Eaton Corporation plc (NYSE:ETN) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on ETN as the stock returned 12.1% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.