Was The Smart Money Right About The Estee Lauder Companies Inc (EL)?

·5 min read

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards The Estee Lauder Companies Inc (NYSE:EL).

The Estee Lauder Companies Inc (NYSE:EL) shareholders have witnessed an increase in hedge fund interest in recent months. The Estee Lauder Companies Inc (NYSE:EL) was in 51 hedge funds' portfolios at the end of December. The all time high for this statistic was previously 50. 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 Q4 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Billionaire Dan Loeb's Top 10 Stock Picks
Billionaire Dan Loeb's Top 10 Stock Picks

Dan Loeb of Third Point

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 we're going to take a look at the key hedge fund action surrounding The Estee Lauder Companies Inc (NYSE:EL).

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

At the end of the fourth quarter, a total of 51 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. By comparison, 50 hedge funds held shares or bullish call options in EL a year ago. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes substantially (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 $1806.6 million at the end of the fourth quarter. On the second spot was Ako Capital which amassed $419.2 million worth of shares. AQR Capital Management, Suvretta Capital Management, and Millennium 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 Ariose Capital allocated the biggest weight to The Estee Lauder Companies Inc (NYSE:EL), around 12.73% of its 13F portfolio. Keywise Capital Management is also relatively very bullish on the stock, earmarking 9.23 percent of its 13F equity portfolio to EL.

Consequently, specific money managers have jumped into The Estee Lauder Companies Inc (NYSE:EL) headfirst. Holocene Advisors, managed by Brandon Haley, initiated the most valuable position in The Estee Lauder Companies Inc (NYSE:EL). Holocene Advisors had $75.5 million invested in the company at the end of the quarter. Dan Loeb's Third Point also made a $53.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Rockefeller and Karl Kroeker's Woodline Partners, Kamyar Khajavi's MIK Capital, and Yi Xin's Ariose Capital.

Let's now review hedge fund activity in other stocks similar to The Estee Lauder Companies Inc (NYSE:EL). We will take a look at Intuitive Surgical, Inc. (NASDAQ:ISRG), General Electric Company (NYSE:GE), Rio Tinto Group (NYSE:RIO), Diageo plc (NYSE:DEO), GlaxoSmithKline plc (NYSE:GSK), Stryker Corporation (NYSE:SYK), and Booking Holdings Inc. (NASDAQ:BKNG). This group of stocks' market caps resemble EL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ISRG,49,1802145,-1 GE,69,5684620,24 RIO,26,1711997,3 DEO,23,667041,4 GSK,30,1742036,-1 SYK,44,3222907,-4 BKNG,108,8247434,-5 Average,49.9,3296883,2.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 49.9 hedge funds with bullish positions and the average amount invested in these stocks was $3297 million. That figure was $3593 million in EL's case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 23 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 overall hedge fund sentiment score for EL is 56.5. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on EL as the stock returned 18.1% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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