Is Essendant Inc (ESND) A Good Stock To Buy?

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

Essendant Inc (NASDAQ:ESND) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. ESND was in 17 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with ESND positions at the end of the previous quarter. At the end of this article we will also compare ESND to other stocks including Chemical Financial Corporation (NASDAQ:CHFC), Power Integrations Inc (NASDAQ:POWI), and Trinseo S.A. (NYSE:TSE) to get a better sense of its popularity.

Now, we’re going to take a glance at the fresh action surrounding Essendant Inc (NASDAQ:ESND).

How are hedge funds trading Essendant Inc (NASDAQ:ESND)?

Heading into Q4, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the largest position in Essendant Inc (NASDAQ:ESND). Pzena Investment Management has a $22.9 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Echo Street Capital Management, led by Greg Poole, holding a $10.9 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish consist of Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and Jim Simons’ Renaissance Technologies.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Essendant Inc (NASDAQ:ESND) headfirst. Gotham Asset Management, managed by Joel Greenblatt, created the most valuable position in Essendant Inc (NASDAQ:ESND). Gotham Asset Management had $1.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $0.4 million position during the quarter. The following funds were also among the new ESND investors: Dmitry Balyasny’s Balyasny Asset Management and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Essendant Inc (NASDAQ:ESND) but similarly valued. These stocks are Chemical Financial Corporation (NASDAQ:CHFC), Power Integrations Inc (NASDAQ:POWI), Trinseo S.A. (NYSE:TSE), and Northwest Bancshares, Inc. (NASDAQ:NWBI). This group of stocks’ market values match ESND’s market value.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $59 million in ESND’s case. Chemical Financial Corporation (NASDAQ:CHFC) is the most popular stock in this table. On the other hand Northwest Bancshares, Inc. (NASDAQ:NWBI) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Essendant Inc (NASDAQ:ESND) 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.