Should I Buy Enerpac Tool Group Corp. (EPAC)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Enerpac Tool Group Corp. (NYSE:EPAC) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Enerpac Tool Group Corp. (NYSE:EPAC) investors should pay attention to an increase in enthusiasm from smart money of late. Enerpac Tool Group Corp. (NYSE:EPAC) was in 18 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 20. Our calculations also showed that EPAC isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

At the moment there are a multitude of signals stock market investors put to use to grade stocks. A duo of the most innovative signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the top hedge fund managers can outperform the S&P 500 by a healthy amount (see the details here).

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a look at the latest hedge fund action encompassing Enerpac Tool Group Corp. (NYSE:EPAC).

How are hedge funds trading Enerpac Tool Group Corp. (NYSE:EPAC)?

At the end of June, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EPAC over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is EPAC A Good Stock To Buy?

More specifically, Pzena Investment Management was the largest shareholder of Enerpac Tool Group Corp. (NYSE:EPAC), with a stake worth $70 million reported as of the end of September. Trailing Pzena Investment Management was Cove Street Capital, which amassed a stake valued at $6.5 million. Renaissance Technologies, Arrowstreet Capital, and D E Shaw 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 Cove Street Capital allocated the biggest weight to Enerpac Tool Group Corp. (NYSE:EPAC), around 1.28% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, designating 0.46 percent of its 13F equity portfolio to EPAC.

As aggregate interest increased, key hedge funds have jumped into Enerpac Tool Group Corp. (NYSE:EPAC) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in Enerpac Tool Group Corp. (NYSE:EPAC). Arrowstreet Capital had $2.2 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.4 million position during the quarter. The following funds were also among the new EPAC investors: Benjamin A. Smith’s Laurion Capital Management, Greg Eisner’s Engineers Gate Manager, and Minhua Zhang’s Weld Capital Management.

Let’s check out hedge fund activity in other stocks similar to Enerpac Tool Group Corp. (NYSE:EPAC). These stocks are Diversified Healthcare Trust (NASDAQ:DHC), Usa Compression Partners LP (NYSE:USAC), GMS Inc. (NYSE:GMS), Astec Industries, Inc. (NASDAQ:ASTE), Schweitzer-Mauduit International, Inc. (NYSE:SWM), The Cheesecake Factory Incorporated (NASDAQ:CAKE), and Michaels Companies Inc (NASDAQ:MIK). All of these stocks’ market caps are closest to EPAC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DHC 14 37796 4
USAC 3 9807 -2
GMS 17 86162 1
ASTE 10 87910 0
SWM 9 17298 -1
CAKE 17 121491 -5
MIK 21 133188 -1
Average 13 70522 -0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $89 million in EPAC’s case. Michaels Companies Inc (NASDAQ:MIK) is the most popular stock in this table. On the other hand Usa Compression Partners LP (NYSE:USAC) is the least popular one with only 3 bullish hedge fund positions. Enerpac Tool Group Corp. (NYSE:EPAC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EPAC is 77.7. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately EPAC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on EPAC were disappointed as the stock returned 6.9% in Q3 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 many of these stocks already outperformed the market so far this year.

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