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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Emcor Group Inc (NYSE:EME) changed recently.
Is EME stock a buy? Emcor Group Inc (NYSE:EME) has seen a decrease in enthusiasm from smart money in recent months. Emcor Group Inc (NYSE:EME) was in 25 hedge funds' portfolios at the end of December. The all time high for this statistic is 29. Our calculations also showed that EME isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to 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 S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Minhua Zhang of Weld Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's check out the latest hedge fund action surrounding Emcor Group Inc (NYSE:EME).
Do Hedge Funds Think EME Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EME over the last 22 quarters. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Stadium Capital Management was the largest shareholder of Emcor Group Inc (NYSE:EME), with a stake worth $45 million reported as of the end of December. Trailing Stadium Capital Management was AQR Capital Management, which amassed a stake valued at $27.1 million. Millennium Management, ACK Asset Management, and Value Holdings LP 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 Stadium Capital Management allocated the biggest weight to Emcor Group Inc (NYSE:EME), around 22.46% of its 13F portfolio. ACK Asset Management is also relatively very bullish on the stock, setting aside 5.98 percent of its 13F equity portfolio to EME.
Judging by the fact that Emcor Group Inc (NYSE:EME) has faced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there exists a select few money managers that slashed their positions entirely heading into Q1. It's worth mentioning that Paul Tudor Jones's Tudor Investment Corp said goodbye to the largest investment of all the hedgies watched by Insider Monkey, comprising about $1.5 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund dropped about $1.3 million worth. These moves are important to note, as total hedge fund interest fell by 4 funds heading into Q1.
Let's now take a look at hedge fund activity in other stocks similar to Emcor Group Inc (NYSE:EME). We will take a look at Digital Turbine Inc (NASDAQ:APPS), Medallia, Inc. (NYSE:MDLA), Regal Beloit Corporation (NYSE:RBC), Medpace Holdings, Inc. (NASDAQ:MEDP), Cousins Properties Incorporated (NYSE:CUZ), Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR), and The Descartes Systems Group Inc (NASDAQ:DSGX). All of these stocks' market caps resemble EME's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APPS,23,318095,0 MDLA,21,428312,-3 RBC,25,308385,0 MEDP,25,248031,-6 CUZ,16,52738,3 ASR,10,63126,0 DSGX,12,248616,0 Average,18.9,238186,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $238 million. That figure was $170 million in EME's case. Regal Beloit Corporation (NYSE:RBC) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) is the least popular one with only 10 bullish hedge fund positions. Emcor Group Inc (NYSE:EME) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EME is 76.9. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on EME as the stock returned 31.2% since the end of Q4 (through 4/19) 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.