A market correction in the fourth quarter, spurred by a number of global macroeconomic concerns and rising interest rates ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by nearly 7 percentage points during the fourth quarter. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let's study the hedge fund sentiment to see how those concerns affected their ownership of Career Education Corp. (NASDAQ:CECO) during the quarter.
Career Education Corp. (NASDAQ:CECO) investors should be aware of an increase in hedge fund interest recently. Our calculations also showed that CECO isn't among the 30 most popular stocks among hedge funds.
At the moment there are a lot of indicators stock market investors use to grade publicly traded companies. A pair of the most under-the-radar indicators are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outclass the market by a superb margin (see the details here).
Let's take a gander at the new hedge fund action surrounding Career Education Corp. (NASDAQ:CECO).
What have hedge funds been doing with Career Education Corp. (NASDAQ:CECO)?
At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in CECO a year ago. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in Career Education Corp. (NASDAQ:CECO) was held by Renaissance Technologies, which reported holding $48.9 million worth of stock at the end of December. It was followed by D E Shaw with a $16.4 million position. Other investors bullish on the company included Tenzing Global Investors, SG Capital Management, and Lonestar Capital Management.
As industrywide interest jumped, key hedge funds were leading the bulls' herd. SG Capital Management, managed by Ken Grossman and Glen Schneider, created the most valuable position in Career Education Corp. (NASDAQ:CECO). SG Capital Management had $12 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $0.8 million investment in the stock during the quarter. The other funds with brand new CECO positions are Paul Tudor Jones's Tudor Investment Corp, Matthew Hulsizer's PEAK6 Capital Management, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's now review hedge fund activity in other stocks similar to Career Education Corp. (NASDAQ:CECO). These stocks are Kelly Services, Inc. (NASDAQ:KELYA), Associated Capital Group, Inc. (NYSE:AC), PC Connection, Inc. (NASDAQ:CNXN), and Kenon Holdings Ltd. (NYSE:KEN). This group of stocks' market values are similar to CECO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KELYA,10,12918,3 AC,4,61237,0 CNXN,6,39609,-2 KEN,1,1200,0 Average,5.25,28741,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $125 million in CECO's case. Kelly Services, Inc. (NASDAQ:KELYA) is the most popular stock in this table. On the other hand Kenon Holdings Ltd. (NYSE:KEN) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Career Education Corp. (NASDAQ:CECO) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on CECO as the stock returned 54.1% 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.