At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Perdoceo Education Corporation (NASDAQ:PRDO).
Is Perdoceo Education Corporation (NASDAQ:PRDO) worth your attention right now? The best stock pickers are turning bullish. The number of bullish hedge fund positions increased by 4 lately. 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). Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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_365194" align="aligncenter" width="400"] David E. Shaw of D.E. Shaw[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a look at the fresh hedge fund action encompassing Perdoceo Education Corporation (NASDAQ:PRDO).
How have hedgies been trading Perdoceo Education Corporation (NASDAQ:PRDO)?
Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were long 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' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in Perdoceo Education Corporation (NASDAQ:PRDO) was held by Renaissance Technologies, which reported holding $53.8 million worth of stock at the end of September. It was followed by D E Shaw with a $22.3 million position. Other investors bullish on the company included Arrowstreet Capital, SG Capital Management, and Marshall Wace LLP. 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, setting aside 3.87 percent of its 13F equity portfolio to PRDO.
As one would reasonably expect, some big names were leading the bulls' herd. Cloverdale Capital Management, managed by C. Jonathan Gattman, initiated 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 go over hedge fund activity in other stocks similar to Perdoceo Education Corporation (NASDAQ:PRDO). 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). This group of stocks' market caps are closest to 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 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on PRDO as the stock returned 61.2% so far in Q2 (through June 10th) 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.
Disclosure: None. This article was originally published at Insider Monkey.