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In this article we will check out the progression of hedge fund sentiment towards Emcor Group Inc (NYSE:EME) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Emcor Group Inc (NYSE:EME) was in 24 hedge funds' portfolios at the end of the first quarter of 2020. EME investors should be aware of a decrease in hedge fund interest in recent months. There were 29 hedge funds in our database with EME holdings at the end of the previous quarter. Our calculations also showed that EME isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
Today there are numerous signals stock market investors use to value their stock investments. A duo of the most under-the-radar signals are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outpace their index-focused peers by a healthy amount (see the details here).
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Paul Marshall of Marshall Wace[/caption]
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 trades like this one. 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. With all of this in mind we're going to analyze the fresh hedge fund action regarding Emcor Group Inc (NYSE:EME).
How have hedgies been trading Emcor Group Inc (NYSE:EME)?
Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in EME over the last 18 quarters. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Emcor Group Inc (NYSE:EME), with a stake worth $62.8 million reported as of the end of September. Trailing AQR Capital Management was Carlson Capital, which amassed a stake valued at $31 million. Stadium Capital Management, GLG Partners, and Renaissance Technologies 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 13.02% of its 13F portfolio. Value Holdings LP is also relatively very bullish on the stock, dishing out 5.11 percent of its 13F equity portfolio to EME.
Seeing as Emcor Group Inc (NYSE:EME) has faced declining sentiment from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of money managers that decided to sell off their positions entirely in the first quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dropped the biggest position of the 750 funds monitored by Insider Monkey, totaling an estimated $16.6 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund said goodbye to about $1.9 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 5 funds in the first quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Emcor Group Inc (NYSE:EME) but similarly valued. We will take a look at Ormat Technologies, Inc. (NYSE:ORA), Schneider National, Inc. (NYSE:SNDR), Enstar Group Ltd. (NASDAQ:ESGR), and Houlihan Lokey Inc (NYSE:HLI). This group of stocks' market values are similar to EME's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ORA,9,164907,-7 SNDR,22,66577,0 ESGR,11,339675,-2 HLI,15,133644,5 Average,14.25,176201,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $176 million. That figure was $201 million in EME's case. Schneider National, Inc. (NYSE:SNDR) is the most popular stock in this table. On the other hand Ormat Technologies, Inc. (NYSE:ORA) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Emcor Group Inc (NYSE:EME) is more popular among hedge funds. 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 still beat the market by 14.2 percentage points. Unfortunately EME wasn't nearly as popular as these 10 stocks and hedge funds that were betting on EME were disappointed as the stock returned 11.9% during the second quarter (through June 10th) 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.
Disclosure: None. This article was originally published at Insider Monkey.