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Where Do Hedge Funds Stand On The Estee Lauder Companies Inc (EL)?

·6 min read

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards The Estee Lauder Companies Inc (NYSE:EL) to find out whether there were any major changes in hedge funds' views.

The Estee Lauder Companies Inc (NYSE:EL) investors should pay attention to an increase in support from the world's most elite money managers recently. The Estee Lauder Companies Inc (NYSE:EL) was in 59 hedge funds' portfolios at the end of March. The all time high for this statistic was previously 51. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that EL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the 21st century investor’s toolkit there are a large number of metrics shareholders use to analyze their stock investments. A duo of the most underrated metrics are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the best money managers can beat the broader indices by a significant amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Aaron Cowen Suvretta Capital
Aaron Cowen Suvretta Capital

Aaron Cowen of Suvretta Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's analyze the fresh hedge fund action regarding The Estee Lauder Companies Inc (NYSE:EL).

Do Hedge Funds Think EL Is A Good Stock To Buy Now?

At first quarter's end, a total of 59 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the fourth quarter of 2020. By comparison, 44 hedge funds held shares or bullish call options in EL a year ago. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Among these funds, Fundsmith LLP held the most valuable stake in The Estee Lauder Companies Inc (NYSE:EL), which was worth $1979.8 million at the end of the fourth quarter. On the second spot was Ako Capital which amassed $411.9 million worth of shares. AQR Capital Management, Third Point, and Suvretta Capital Management 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 Keywise Capital Management allocated the biggest weight to The Estee Lauder Companies Inc (NYSE:EL), around 8.95% of its 13F portfolio. Fundsmith LLP is also relatively very bullish on the stock, earmarking 6.3 percent of its 13F equity portfolio to EL.

Now, some big names have jumped into The Estee Lauder Companies Inc (NYSE:EL) headfirst. Tairen Capital, managed by Larry Chen and Terry Zhang, established the most valuable position in The Estee Lauder Companies Inc (NYSE:EL). Tairen Capital had $46.5 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $24.9 million position during the quarter. The other funds with new positions in the stock are Noam Gottesman's GLG Partners, James Crichton's Hitchwood Capital Management, and Brad Stephens's Six Columns Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as The Estee Lauder Companies Inc (NYSE:EL) but similarly valued. We will take a look at Intuit Inc. (NASDAQ:INTU), Lockheed Martin Corporation (NYSE:LMT), Square, Inc. (NYSE:SQ), Uber Technologies, Inc. (NYSE:UBER), Target Corporation (NYSE:TGT), Micron Technology, Inc. (NASDAQ:MU), and CVS Health Corporation (NYSE:CVS). This group of stocks' market values match EL's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INTU,68,4707761,0 LMT,50,2295448,-3 SQ,92,9202246,3 UBER,130,10532866,-5 TGT,60,4760942,-18 MU,100,7621579,0 CVS,62,1315655,6 Average,80.3,5776642,-2.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 80.3 hedge funds with bullish positions and the average amount invested in these stocks was $5777 million. That figure was $4103 million in EL's case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand Lockheed Martin Corporation (NYSE:LMT) is the least popular one with only 50 bullish hedge fund positions. The Estee Lauder Companies Inc (NYSE:EL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EL is 45.6. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately EL wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); EL investors were disappointed as the stock returned 3.4% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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

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