Nordson Corporation (NDSN) is Red Hot After Beating Estimates

Shares of Nordson Corporation (NASDAQ:NDSN) have jumped by more than 13% today after the company posted better-than-expected results for its second quarter of fiscal year 2016. The dispensing equipment manufacturer’s EPS of $1.19 trounced estimates by $0.27, while revenue increased by 9.2% year-over-year to reach $438 million, sharply beating expectations of $415.52 million. Sales in the U.S declined by 6.3% to $131.3 million on a constant currency basis. However, revenue from the rest of the Americas increased by 15.4% to $33.6 million, while revenue from Europe grew by 19.5% to $125.9 million. For the third quarter of FY2016, Nordson Corporation expects its EPS to be in the range of $1.25 to $1.37, better than the estimated $1.23.

In a statement, Michael Hilton, the CEO of Nordson Corporation (NASDAQ:NDSN), said that the company continues to focus on innovative products, new applications, tiering, and emerging markets to drive growth. Mr. Hilton said that the company is making progress on its previously announced strategy of margin enhancement, and it is on track to achieve its goal of a 200-basis-point improvement from its FY2015 normalized operating margin by the end of FY2017.

Is Nordson Corporation (NASDAQ:NDSN) a good investment now? Prominent investors are getting more bullish. The number of long hedge fund positions went up by 3 during the first quarter, to 15. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Dunkin Brands Group Inc (NASDAQ:DNKN), Teck Resources Ltd (USA) (NYSE:TCK), and Arista Networks Inc (NYSE:ANET) to gather more data points.

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, BlueCrest Capital Mgmt, managed by Michael Platt and William Reeves, holds the largest position in Nordson Corporation (NASDAQ:NDSN). BlueCrest Capital Mgmt. has a $4.8 million position in the stock, comprising 0.3% of its 13F portfolio. On BlueCrest Capital Mgmt’s heels is Millennium Management, led by Israel Englander, holding a $2.2 million position; less than 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism include D. E. Shaw’s D E Shaw, Roger Ibbotson’s Zebra Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.

On the next page we’ll look at some funds that took up positions in Nordson during Q1, as well as compare the stock to a handful of others with similar market caps.

Several top money managers jumped into Nordson Corporation (NASDAQ:NDSN) headfirst in the first quarter. PEAK6 Capital Management assembled the largest call position in Nordson Corporation (NASDAQ:NDSN). PEAK6 Capital Management had $1.2 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $0.8 million investment in the stock during the quarter. The following funds were also among the new NDSN investors: Peter Muller’s PDT Partners, George Hall’s Clinton Group, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.

Let’s now review hedge fund activity in other stocks similar to Nordson Corporation (NASDAQ:NDSN). These stocks are Dunkin Brands Group Inc (NASDAQ:DNKN), Teck Resources Ltd (USA) (NYSE:TCK), Arista Networks Inc (NYSE:ANET), and Microsemi Corporation (NASDAQ:MSCC). This group of stocks’ market values are similar to NDSN’s market value.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $220 million. That figure was $53 million in NDSN’s case. Arista Networks Inc (NYSE:ANET) is the most popular stock in this table. On the other hand Microsemi Corporation (NASDAQ:MSCC) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Nordson Corporation (NASDAQ:NDSN) is even less popular than MSCC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None