EnPro Industries, Inc. (NPO): Are Hedge Funds Right About This Stock?

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool in identifying the next stock to invest in.

Is EnPro Industries, Inc. (NYSE:NPO) going to take off soon? Hedge funds are taking a bearish view. The number of long hedge fund positions went down by 2 recently. At the end of this article, we will also compare EnPro Industries, Inc. (NYSE:NPO) to other stocks, including Nuveen Premium Income Municipal Fund Inc (NYSE:NPI), Federal Signal Corporation (NYSE:FSS), and Teladoc Inc (NYSE:TDOC) to get a better sense of its popularity.

In the eyes of most traders, hedge funds are perceived as slow, outdated financial vehicles of years past. While there are greater than 8000 funds in operation at present, Our researchers choose to focus on the moguls of this club, about 700 funds. It is estimated that this group of investors controls most of the smart money’s total asset base, and by following their unrivaled stock picks, Insider Monkey has figured out a few investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per year for a decade in their back tests.

With all of this in mind, we’re going to view the recent action surrounding EnPro Industries, Inc. (NYSE:NPO).

How have hedgies been trading EnPro Industries, Inc. (NYSE:NPO)?

At the end of Q3, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 10% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Greywolf Capital Management, managed by Jonathan Savitz, holds the biggest position in EnPro Industries, Inc. (NYSE:NPO). Greywolf Capital Management has a $61 million position in the stock, comprising 10% of its 13F portfolio. Coming in second is Silver Point Capital, managed by Edward A. Mule, which holds a $55.2 million position; the fund has 7.1% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism include Bart Baum’s Ionic Capital Management, Mark Weissman, Adam Cohen and David Coleto’s Caspian Capital Partners, and Anthony Bozza’s Lakewood Capital Management.

Seeing as EnPro Industries, Inc. (NYSE:NPO) has faced a declining sentiment from the smart money, we can see that there were a few fund managers that slashed their full holdings by the end of the third quarter. Intriguingly, Geoffrey Raynor’s Q Investments (Specter Holdings) cut the biggest investment of the “upper crust” of funds monitored by Insider Monkey, comprising close to $3.8 million in stock. Michael Platt and William Reeves’s fund, BlueCrest Capital Mgmt., also cut its stock, about $2 million worth of shares. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to EnPro Industries, Inc. (NYSE:NPO). We will take a look at Nuveen Premium Income Municipal Fund Inc (NYSE:NPI), Federal Signal Corporation (NYSE:FSS), Teladoc Inc (NYSE:TDOC), and Pretium Resources Inc (NYSE:PVG). This group of stocks’ market caps is the closest to EnPro Industries, Inc. (NYSE:NPO)’s market cap.

As you can see, these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $226 million in EnPro Industries, Inc. (NYSE:NPO)’s case. Federal Signal Corporation (NYSE:FSS) is the most popular stock in this table. On the other hand, Nuveen Premium Income Municipal Fund Inc (NYSE:NPI) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, EnPro Industries, Inc. (NYSE:NPO) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.