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Hedge Funds Have Never Been This Bullish On GSX Techedu Inc. (GSX)

Abigail Fisher

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about GSX Techedu Inc. (NYSE:GSX) in this article.

Is GSX Techedu Inc. (NYSE:GSX) ready to rally soon? Money managers are becoming more confident. The number of bullish hedge fund positions increased by 1 recently. Our calculations also showed that GSX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

In the financial world there are a multitude of gauges stock market investors employ to analyze stocks. A couple of the less known gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the best money managers can outpace their index-focused peers by a superb margin (see the details here).

[caption id="attachment_249122" align="aligncenter" width="500"] Wall Street Bull[/caption]

Abrams Bison Investor Letters

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to take a look at the key hedge fund action regarding GSX Techedu Inc. (NYSE:GSX).

How are hedge funds trading GSX Techedu Inc. (NYSE:GSX)?

At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in GSX a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey's hedge fund database, Sylebra Capital Management, managed by Daniel Patrick Gibson, holds the most valuable position in GSX Techedu Inc. (NYSE:GSX). Sylebra Capital Management has a $5.8 million position in the stock, comprising 0.3% of its 13F portfolio. On Sylebra Capital Management's heels is Tairen Capital, led by Larry Chen and Terry Zhang, holding a $0.6 million position; 0.1% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position Sylebra Capital Management allocated the biggest weight to GSX Techedu Inc. (NYSE:GSX), around 0.25% of its 13F portfolio. Tairen Capital is also relatively very bullish on the stock, earmarking 0.09 percent of its 13F equity portfolio to GSX.

As one would reasonably expect, some big names have been driving this bullishness. Tairen Capital, managed by Larry Chen and Terry Zhang, established the biggest position in GSX Techedu Inc. (NYSE:GSX). Tairen Capital had $0.6 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also initiated a $0.4 million position during the quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as GSX Techedu Inc. (NYSE:GSX) but similarly valued. These stocks are Sibanye Gold Ltd (NYSE:SBGL), ANGI Homeservices Inc. (NASDAQ:ANGI), Murphy Oil Corporation (NYSE:MUR), and New Relic Inc (NYSE:NEWR). This group of stocks' market values are closest to GSX's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBGL,14,135328,5 ANGI,21,261024,1 MUR,17,143553,-1 NEWR,35,518778,6 Average,21.75,264671,2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $265 million. That figure was $7 million in GSX's case. New Relic Inc (NYSE:NEWR) is the most popular stock in this table. On the other hand Sibanye Gold Ltd (NYSE:SBGL) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks GSX Techedu Inc. (NYSE:GSX) is even less popular than SBGL. Hedge funds clearly dropped the ball on GSX as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on GSX as the stock returned 14.9% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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