Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Grand Canyon Education Inc (NASDAQ:LOPE) based on that data and determine whether they were really smart about the stock.
Is Grand Canyon Education Inc (NASDAQ:LOPE) ready to rally soon? The smart money was taking a bullish view. The number of long hedge fund bets improved by 7 in recent months. Grand Canyon Education Inc (NASDAQ:LOPE) was in 35 hedge funds' portfolios at the end of June. The all time high for this statistics is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LOPE isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 28 hedge funds in our database with LOPE positions at the end of the first quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 go over the recent hedge fund action regarding Grand Canyon Education Inc (NASDAQ:LOPE).
How have hedgies been trading Grand Canyon Education Inc (NASDAQ:LOPE)?
At the end of the second quarter, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LOPE over the last 20 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, Sachem Head Capital was the largest shareholder of Grand Canyon Education Inc (NASDAQ:LOPE), with a stake worth $63.4 million reported as of the end of September. Trailing Sachem Head Capital was Park West Asset Management, which amassed a stake valued at $22.4 million. Renaissance Technologies, Intrinsic Edge Capital, and Arrowstreet Capital 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 Sachem Head Capital allocated the biggest weight to Grand Canyon Education Inc (NASDAQ:LOPE), around 4.51% of its 13F portfolio. Lyon Street Capital is also relatively very bullish on the stock, designating 3.01 percent of its 13F equity portfolio to LOPE.
Consequently, some big names have jumped into Grand Canyon Education Inc (NASDAQ:LOPE) headfirst. Sachem Head Capital, managed by Scott Ferguson, created the largest position in Grand Canyon Education Inc (NASDAQ:LOPE). Sachem Head Capital had $63.4 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $16.2 million investment in the stock during the quarter. The other funds with brand new LOPE positions are Blair Baker's Precept Capital Management, Qing Li's Sciencast Management, and Donald Sussman's Paloma Partners.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Grand Canyon Education Inc (NASDAQ:LOPE) but similarly valued. We will take a look at Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), Tetra Tech, Inc. (NASDAQ:TTEK), Lancaster Colony Corporation (NASDAQ:LANC), Inovio Pharmaceuticals Inc (NASDAQ:INO), FTI Consulting, Inc. (NYSE:FCN), Tata Motors Limited (NYSE:TTM), and Blueprint Medicines Corporation (NASDAQ:BPMC). This group of stocks' market values resemble LOPE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BHVN,42,915722,13 TTEK,19,90700,-2 LANC,19,246200,-4 INO,14,117679,6 FCN,32,377924,13 TTM,9,36380,-1 BPMC,38,1004517,2 Average,24.7,398446,3.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $398 million. That figure was $207 million in LOPE's case. Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 9 bullish hedge fund positions. Grand Canyon Education Inc (NASDAQ:LOPE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LOPE is 79.4. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately LOPE wasn't nearly as popular as these 10 stocks and hedge funds that were betting on LOPE were disappointed as the stock returned 3.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.