Were Hedge Funds Right About EnPro Industries, Inc. (NPO)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of EnPro Industries, Inc. (NYSE:NPO).

EnPro Industries, Inc. (NYSE:NPO) shareholders have witnessed an increase in hedge fund sentiment recently. EnPro Industries, Inc. (NYSE:NPO) was in 17 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 19. There were 14 hedge funds in our database with NPO holdings at the end of December. Our calculations also showed that NPO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Michael Gelband of ExodusPoint Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a glance at the fresh hedge fund action regarding EnPro Industries, Inc. (NYSE:NPO).

Do Hedge Funds Think NPO Is A Good Stock To Buy Now?

At first quarter’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in NPO a year ago. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

More specifically, GAMCO Investors was the largest shareholder of EnPro Industries, Inc. (NYSE:NPO), with a stake worth $98.1 million reported as of the end of March. Trailing GAMCO Investors was Paradice Investment Management, which amassed a stake valued at $57.7 million. Royce & Associates, Arrowstreet Capital, and Birch Run Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Birch Run Capital allocated the biggest weight to EnPro Industries, Inc. (NYSE:NPO), around 4.61% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, setting aside 2.77 percent of its 13F equity portfolio to NPO.

As one would reasonably expect, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the largest position in EnPro Industries, Inc. (NYSE:NPO). Millennium Management had $4.2 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.9 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Donald Sussman’s Paloma Partners, and Ken Griffin’s Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as EnPro Industries, Inc. (NYSE:NPO) but similarly valued. We will take a look at Heska Corp (NASDAQ:HSKA), Five Prime Therapeutics Inc (NASDAQ:FPRX), Community Health Systems, Inc. (NYSE:CYH), Cardtronics plc (NASDAQ:CATM), Cerevel Therapeutics Holdings, Inc. (NASDAQ:CERE), Core-Mark Holding Company, Inc. (NASDAQ:CORE), and CBIZ, Inc. (NYSE:CBZ). This group of stocks’ market values are similar to NPO’s market value.

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As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $365 million. That figure was $214 million in NPO’s case. Five Prime Therapeutics Inc (NASDAQ:FPRX) is the most popular stock in this table. On the other hand CBIZ, Inc. (NYSE:CBZ) is the least popular one with only 13 bullish hedge fund positions. EnPro Industries, Inc. (NYSE:NPO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NPO is 47.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately NPO wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NPO investors were disappointed as the stock returned 6.2% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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