Is American Public Education, Inc. (NASDAQ:APEI) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
American Public Education, Inc. (NASDAQ:APEI) was in 14 hedge funds' portfolios at the end of September. APEI investors should pay attention to an increase in activity from the world's largest hedge funds in recent months. There were 13 hedge funds in our database with APEI holdings at the end of the previous quarter. Our calculations also showed that APEI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's view the latest hedge fund action regarding American Public Education, Inc. (NASDAQ:APEI).
How have hedgies been trading American Public Education, Inc. (NASDAQ:APEI)?
Heading into the fourth quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the second quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in APEI a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in American Public Education, Inc. (NASDAQ:APEI), which was worth $28.5 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $10 million worth of shares. D E Shaw, Millennium Management, and GLG Partners 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 Weld Capital Management allocated the biggest weight to American Public Education, Inc. (NASDAQ:APEI), around 0.04% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to APEI.
As aggregate interest increased, specific money managers have jumped into American Public Education, Inc. (NASDAQ:APEI) headfirst. Marshall Wace, managed by Paul Marshall and Ian Wace, established the most outsized position in American Public Education, Inc. (NASDAQ:APEI). Marshall Wace had $0.6 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also initiated a $0.2 million position during the quarter. The only other fund with a brand new APEI position is Donald Sussman's Paloma Partners.
Let's now take a look at hedge fund activity in other stocks similar to American Public Education, Inc. (NASDAQ:APEI). We will take a look at Just Energy Group, Inc. (NYSE:JE), Vista Outdoor Inc (NYSE:VSTO), EZCORP Inc (NASDAQ:EZPW), and X Financial (NYSE:XYF). This group of stocks' market values are closest to APEI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JE,8,32204,-5 VSTO,14,68721,-2 EZPW,18,81131,-3 XYF,2,1574,-1 Average,10.5,45908,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $57 million in APEI's case. EZCORP Inc (NASDAQ:EZPW) is the most popular stock in this table. On the other hand X Financial (NYSE:XYF) is the least popular one with only 2 bullish hedge fund positions. American Public Education, Inc. (NASDAQ:APEI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on APEI as the stock returned 10.8% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.