Before we spend countless hours researching a company, we'd like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We would like to do so 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 The Estee Lauder Companies Inc (NYSE:EL).
The Estee Lauder Companies Inc (NYSE:EL) shareholders have witnessed a decrease in enthusiasm from smart money lately. Our calculations also showed that EL isn't among the 30 most popular stocks among hedge funds, however, overall hedge fund sentiment towards the stock has been increasing for the last 2 years.
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 market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's take a look at the new hedge fund action regarding The Estee Lauder Companies Inc (NYSE:EL).
Hedge fund activity in The Estee Lauder Companies Inc (NYSE:EL)
At the end of the fourth quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards EL over the last 14 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in The Estee Lauder Companies Inc (NYSE:EL) was held by AQR Capital Management, which reported holding $387.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $290.9 million position. Other investors bullish on the company included Arrowstreet Capital, Millennium Management, and Columbus Circle Investors.
Since The Estee Lauder Companies Inc (NYSE:EL) has faced falling interest from the smart money, it's safe to say that there lies a certain "tier" of money managers that slashed their full holdings by the end of the third quarter. It's worth mentioning that Brandon Haley's Holocene Advisors dropped the biggest stake of the 700 funds followed by Insider Monkey, valued at an estimated $35.9 million in stock. Anand Parekh's fund, Alyeska Investment Group, also sold off its stock, about $25.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks similar to The Estee Lauder Companies Inc (NYSE:EL). These stocks are America Movil SAB de CV (NYSE:AMX), Dominion Energy, Inc. (NYSE:D), Honda Motor Co Ltd (NYSE:HMC), and General Dynamics Corporation (NYSE:GD). This group of stocks' market valuations are closest to EL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMX,12,244949,2 D,37,1042109,10 HMC,13,105688,2 GD,37,6273648,2 Average,24.75,1916599,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $1917 million. That figure was $1159 million in EL's case. Dominion Energy, Inc. (NYSE:D) is the most popular stock in this table. On the other hand America Movil SAB de CV (NYSE:AMX) is the least popular one with only 12 bullish hedge fund positions. The Estee Lauder Companies Inc (NYSE:EL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on EL as the stock returned 25.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.