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Here’s What Hedge Funds Think About Eaton Corporation plc (ETN)

Reymerlyn Martin

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31, so let’s proceed with the discussion of the hedge fund sentiment on Eaton Corporation plc (NYSE:ETN).

Eaton Corporation plc (NYSE:ETN) has experienced an increase in support from the world's most elite money managers of late. ETN was in 39 hedge funds' portfolios at the end of the first quarter of 2019. There were 30 hedge funds in our database with ETN positions at the end of the previous quarter. Our calculations also showed that ETN isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

GOTHAM ASSET MANAGEMENT

Let's take a look at the new hedge fund action regarding Eaton Corporation plc (NYSE:ETN).

How have hedgies been trading Eaton Corporation plc (NYSE:ETN)?

At the end of the first quarter, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 30% from one quarter earlier. On the other hand, there were a total of 37 hedge funds with a bullish position in ETN a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

ETN_jun2019

The largest stake in Eaton Corporation plc (NYSE:ETN) was held by AQR Capital Management, which reported holding $198.1 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $82.3 million position. Other investors bullish on the company included D E Shaw, Interval Partners, and Gotham Asset Management.

Now, key hedge funds were leading the bulls' herd. Impax Asset Management, managed by Ian Simm, created the biggest position in Eaton Corporation plc (NYSE:ETN). Impax Asset Management had $8.3 million invested in the company at the end of the quarter. Javier Velazquez's Albar Capital also initiated a $7.6 million position during the quarter. The following funds were also among the new ETN investors: Steve Cohen's Point72 Asset Management, D. E. Shaw's D E Shaw, and Minhua Zhang's Weld Capital Management.

Let's also examine 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 Worldpay, Inc. (NYSE:WP), eBay Inc (NASDAQ:EBAY), Johnson Controls International plc (NYSE:JCI), and Constellation Brands, Inc. (NYSE:STZ). This group of stocks' market values are closest to ETN's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WP,75,5218167,27 EBAY,48,3933951,6 JCI,25,727926,-1 STZ,38,2547745,-24 Average,46.5,3106947,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.5 hedge funds with bullish positions and the average amount invested in these stocks was $3107 million. That figure was $685 million in ETN's case. Worldpay, Inc. (NYSE:WP) is the most popular stock in this table. On the other hand Johnson Controls International plc (NYSE:JCI) is the least popular one with only 25 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ETN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ETN investors were disappointed as the stock returned -5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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