Should You Buy EnerSys (ENS)?

The third-quarter stock market correction has turned out to resemble the situation observed during the Asian financial crisis of 1997. The two relatively short-lived corrections occurred at a time with stable interest rates, falling commodity markets, with strong-performing technology and healthcare sectors, and struggling energy sector. Similarly, the two corrections followed long periods without a correction, which had to come sooner or later and it did. Even so, several prominent hedge fund investors publicly asserted their bearish view on the current state of the U.S. equity markets, suggesting that they significantly cut their exposure to equities during the latest quarter. Having said that, it would be worthwhile to take a look at the hedge fund sentiment on EnerSys (NYSE:ENS) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Hedge fund interest in EnerSys (NYSE:ENS) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Tupperware Brands Corporation (NYSE:TUP), Cimpress NV (NASDAQ:CMPR), and Cathay General Bancorp (NASDAQ:CATY) to gather more data points.

In the 21st century investor’s toolkit there are dozens of indicators shareholders employ to size up their holdings. A couple of the most under-the-radar indicators are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outpace the S&P 500 by a significant margin (see the details here).

Now, we’re going to analyze the fresh action encompassing EnerSys (NYSE:ENS).

What does the smart money think about EnerSys (NYSE:ENS)?

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the previous quarter. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the largest position in EnerSys (NYSE:ENS), worth close to $48 million, amounting to 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Dreman Value Management, managed by David Dreman, which holds a $7.4 million position; 0.7% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish contain Charles Paquelet’s Skylands Capital, Martin Whitman’s Third Avenue Management and Neil Chriss’s Hutchin Hill Capital.

Because EnerSys (NYSE:ENS) has witnessed a declination in interest from the smart money, it’s easy to see that there is a sect of funds that slashed their full holdings by the end of the third quarter. Interestingly, Andy Redleaf’s Whitebox Advisors dumped the largest position of all the hedgies followed by Insider Monkey, valued at an estimated $3.8 million in stock, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt. was right behind this move, as the fund dumped about $3.5 million worth of shares. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to EnerSys (NYSE:ENS). These stocks are Tupperware Brands Corporation (NYSE:TUP), Cimpress NV (NASDAQ:CMPR), Cathay General Bancorp (NASDAQ:CATY), and ALLETE Inc (NYSE:ALE). This group of stocks’ market caps match ENS’s market cap.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $233 million. That figure was only $74 million in ENS’s case. Tupperware Brands Corporation (NYSE:TUP) is the most popular stock in this table. On the other hand ALLETE Inc (NYSE:ALE) is the least popular one with only 11 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. In this regard TUP might be a better candidate to consider a long position.