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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Laureate Education, Inc. (NASDAQ:LAUR).
Is Laureate Education, Inc. (NASDAQ:LAUR) undervalued? Hedge funds were getting more optimistic. The number of bullish hedge fund positions advanced by 1 in recent months. Laureate Education, Inc. (NASDAQ:LAUR) was in 21 hedge funds' portfolios at the end of September. The all time high for this statistic is 34. Our calculations also showed that LAUR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Louis Bacon Moore of Moore Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let's take a glance at the new hedge fund action surrounding Laureate Education, Inc. (NASDAQ:LAUR).
Do Hedge Funds Think LAUR Is A Good Stock To Buy Now?
At third quarter's end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LAUR over the last 25 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Moore Global Investments was the largest shareholder of Laureate Education, Inc. (NASDAQ:LAUR), with a stake worth $44.8 million reported as of the end of September. Trailing Moore Global Investments was Maple Rock Capital, which amassed a stake valued at $29.2 million. Citadel Investment Group, Park West Asset Management, and Melvin Capital Management 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 Solas Capital Management allocated the biggest weight to Laureate Education, Inc. (NASDAQ:LAUR), around 5.88% of its 13F portfolio. Maple Rock Capital is also relatively very bullish on the stock, earmarking 4.09 percent of its 13F equity portfolio to LAUR.
As industrywide interest jumped, specific money managers have jumped into Laureate Education, Inc. (NASDAQ:LAUR) headfirst. Mangrove Partners, managed by Nathaniel August, assembled the most valuable position in Laureate Education, Inc. (NASDAQ:LAUR). Mangrove Partners had $5.3 million invested in the company at the end of the quarter. Phil Frohlich's Prescott Group Capital Management also initiated a $3.3 million position during the quarter. The other funds with brand new LAUR positions are Matthew Hulsizer's PEAK6 Capital Management, Noam Gottesman's GLG Partners, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's go over hedge fund activity in other stocks similar to Laureate Education, Inc. (NASDAQ:LAUR). These stocks are SM Energy Company (NYSE:SM), Kennedy-Wilson Holdings Inc (NYSE:KW), Compania Cervecerias Unidas S.A. (NYSE:CCU), AtriCure Inc. (NASDAQ:ATRC), Installed Building Products Inc (NYSE:IBP), GATX Corporation (NYSE:GATX), and ZipRecruiter Inc. (NYSE:ZIP). All of these stocks' market caps match LAUR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SM,24,321678,-1 KW,13,503305,-5 CCU,7,21568,-2 ATRC,21,243485,0 IBP,15,38662,3 GATX,12,192518,-5 ZIP,10,87951,10 Average,14.6,201310,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $201 million. That figure was $184 million in LAUR's case. SM Energy Company (NYSE:SM) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) is the least popular one with only 7 bullish hedge fund positions. Laureate Education, Inc. (NASDAQ:LAUR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LAUR is 65.7. 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. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on LAUR as the stock returned 28.1% since the end of Q3 (through 12/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.