Did Hedge Funds Make The Right Call On Perdoceo Education Corporation (PRDO)?
The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Perdoceo Education Corporation (NASDAQ:PRDO) and determine whether the smart money was really smart about this stock.
Is Perdoceo Education Corporation (NASDAQ:PRDO) going to take off soon? The best stock pickers were in a bullish mood. The number of bullish hedge fund positions rose by 4 recently. Our calculations also showed that PRDO isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). PRDO was in 23 hedge funds' portfolios at the end of March. There were 19 hedge funds in our database with PRDO positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_256989" align="aligncenter" width="385"]
Dmitry Balyasny of Balyasny Asset Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind we're going to check out the recent hedge fund action surrounding Perdoceo Education Corporation (NASDAQ:PRDO).
What does smart money think about Perdoceo Education Corporation (NASDAQ:PRDO)?
At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PRDO over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Perdoceo Education Corporation (NASDAQ:PRDO), with a stake worth $53.8 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $22.3 million. Arrowstreet Capital, SG Capital Management, and Marshall Wace LLP 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 SG Capital Management allocated the biggest weight to Perdoceo Education Corporation (NASDAQ:PRDO), around 6.09% of its 13F portfolio. Tenzing Global Investors is also relatively very bullish on the stock, designating 3.87 percent of its 13F equity portfolio to PRDO.
As aggregate interest increased, key money managers were leading the bulls' herd. Cloverdale Capital Management, managed by C. Jonathan Gattman, assembled the largest position in Perdoceo Education Corporation (NASDAQ:PRDO). Cloverdale Capital Management had $2.1 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also initiated a $1.2 million position during the quarter. The following funds were also among the new PRDO investors: Dmitry Balyasny's Balyasny Asset Management, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, and Mika Toikka's AlphaCrest Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Perdoceo Education Corporation (NASDAQ:PRDO) but similarly valued. We will take a look at Matthews International Corp (NASDAQ:MATW), Phreesia, Inc. (NYSE:PHR), Five Point Holdings, LLC (NYSE:FPH), and Gol Linhas Aereas Inteligentes SA (NYSE:GOL). All of these stocks' market caps match PRDO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MATW,9,33381,0 PHR,8,51620,-8 FPH,13,174951,-2 GOL,11,39509,-1 Average,10.25,74865,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $141 million in PRDO's case. Five Point Holdings, LLC (NYSE:FPH) is the most popular stock in this table. On the other hand Phreesia, Inc. (NYSE:PHR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Perdoceo Education Corporation (NASDAQ:PRDO) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on PRDO as the stock returned 47.6% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
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