The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Embraer SA (NYSE:ERJ) based on those filings.
Is ERJ a good stock to buy now? Embraer SA (NYSE:ERJ) has seen a decrease in support from the world's most elite money managers in recent months. Embraer SA (NYSE:ERJ) was in 10 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 17. Our calculations also showed that ERJ isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most stock holders, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are over 8000 funds in operation at the moment, We hone in on the aristocrats of this group, around 850 funds. These investment experts handle bulk of the smart money's total capital, and by keeping track of their unrivaled equity investments, Insider Monkey has brought to light numerous investment strategies that have historically beaten the market. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
David Iben of Kopernik Global Investors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with 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. With all of this in mind we're going to check out the fresh hedge fund action surrounding Embraer SA (NYSE:ERJ).
Do Hedge Funds Think ERJ Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in ERJ a year ago. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Embraer SA (NYSE:ERJ) was held by Oldfield Partners, which reported holding $18.8 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $6 million position. Other investors bullish on the company included Kopernik Global Investors, York Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Oldfield Partners allocated the biggest weight to Embraer SA (NYSE:ERJ), around 2.03% of its 13F portfolio. Kopernik Global Investors is also relatively very bullish on the stock, dishing out 0.91 percent of its 13F equity portfolio to ERJ.
Seeing as Embraer SA (NYSE:ERJ) has faced declining sentiment from the aggregate hedge fund industry, it's easy to see that there exists a select few funds that slashed their entire stakes in the third quarter. It's worth mentioning that Renaissance Technologies said goodbye to the biggest investment of the "upper crust" of funds watched by Insider Monkey, totaling an estimated $15.3 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also said goodbye to its stock, about $0.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds in the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Embraer SA (NYSE:ERJ) but similarly valued. We will take a look at Monarch Casino & Resort, Inc. (NASDAQ:MCRI), Alexander & Baldwin Inc (NYSE:ALEX), GreenSky, Inc. (NASDAQ:GSKY), Associated Capital Group, Inc. (NYSE:AC), Endurance International Group Holdings Inc (NASDAQ:EIGI), Southside Bancshares, Inc. (NASDAQ:SBSI), and Provident Financial Services, Inc. (NYSE:PFS). This group of stocks' market values match ERJ's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MCRI,10,86745,-4 ALEX,15,33459,2 GSKY,12,23357,-1 AC,5,56413,0 EIGI,16,95183,1 SBSI,8,31525,-3 PFS,10,18111,0 Average,10.9,49256,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.9 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $41 million in ERJ's case. Endurance International Group Holdings Inc (NASDAQ:EIGI) is the most popular stock in this table. On the other hand Associated Capital Group, Inc. (NYSE:AC) is the least popular one with only 5 bullish hedge fund positions. Embraer SA (NYSE:ERJ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ERJ is 41.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on ERJ as the stock returned 63% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.