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Were Hedge Funds Right About Dumping EnerSys (ENS)?

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds.

Is EnerSys (NYSE:ENS) worth your attention right now? The smart money is becoming less confident. The number of bullish hedge fund bets decreased by 4 lately. Our calculations also showed that ENS isn’t among the 30 most popular stocks among hedge funds (view the video below). ENS was in 16 hedge funds’ portfolios at the end of the second quarter of 2019. There were 20 hedge funds in our database with ENS positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Today there are a large number of metrics market participants use to evaluate stocks. Two of the most innovative metrics are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top hedge fund managers can outpace the market by a very impressive margin (see the details here).

Philip Hempleman Ardsley Partners

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s review the key hedge fund action surrounding EnerSys (NYSE:ENS).

Hedge fund activity in EnerSys (NYSE:ENS)

At Q2’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ENS over the last 16 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

ENS_oct2019

The largest stake in EnerSys (NYSE:ENS) was held by ACK Asset Management, which reported holding $20.5 million worth of stock at the end of March. It was followed by Royce & Associates with a $11.4 million position. Other investors bullish on the company included Skylands Capital, Marshall Wace LLP, and Citadel Investment Group.

Due to the fact that EnerSys (NYSE:ENS) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there exists a select few funds who sold off their positions entirely last quarter. At the top of the heap, David Harding’s Winton Capital Management said goodbye to the largest position of the 750 funds followed by Insider Monkey, valued at about $7.9 million in stock, and David Rosen’s Rubric Capital Management was right behind this move, as the fund sold off about $4.8 million worth. These transactions are important to note, as total hedge fund interest fell by 4 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to EnerSys (NYSE:ENS). We will take a look at Mimecast Limited (NASDAQ:MIME), Hutchison China MediTech Limited (NASDAQ:HCM), Cathay General Bancorp (NASDAQ:CATY), and Advanced Disposal Services, Inc. (NYSE:ADSW). This group of stocks’ market valuations are similar to ENS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MIME 26 846004 -9
HCM 23 103651 17
CATY 12 38123 -2
ADSW 26 559342 14
Average 21.75 386780 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $387 million. That figure was $78 million in ENS’s case. Mimecast Limited (NASDAQ:MIME) is the most popular stock in this table. On the other hand Cathay General Bancorp (NASDAQ:CATY) is the least popular one with only 12 bullish hedge fund positions. EnerSys (NYSE:ENS) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ENS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ENS investors were disappointed as the stock returned -3.5% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.

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

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