Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Laureate Education, Inc. (NASDAQ:LAUR).
Laureate Education, Inc. (NASDAQ:LAUR) has experienced an increase in support from the world's most elite money managers lately. LAUR was in 25 hedge funds' portfolios at the end of the third quarter of 2019. There were 23 hedge funds in our database with LAUR positions at the end of the previous quarter. Our calculations also showed that LAUR 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_366432" align="aligncenter" width="450"] Jeffrey Tannenbaum of Fir Tree[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to analyze the new hedge fund action surrounding Laureate Education, Inc. (NASDAQ:LAUR).
How have hedgies been trading Laureate Education, Inc. (NASDAQ:LAUR)?
Heading into the fourth quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in LAUR a year ago. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Melvin Capital Management held the most valuable stake in Laureate Education, Inc. (NASDAQ:LAUR), which was worth $104.9 million at the end of the third quarter. On the second spot was Select Equity Group which amassed $67.4 million worth of shares. 12 West Capital Management, Park West Asset Management, and Fir Tree 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 Nut Tree Capital allocated the biggest weight to Laureate Education, Inc. (NASDAQ:LAUR), around 7.49% of its portfolio. SG Capital Management is also relatively very bullish on the stock, earmarking 5.92 percent of its 13F equity portfolio to LAUR.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Laurion Capital Management, managed by Benjamin A. Smith, established the biggest position in Laureate Education, Inc. (NASDAQ:LAUR). Laurion Capital Management had $11.9 million invested in the company at the end of the quarter. Jeffrey Talpins's Element Capital Management also made a $5.8 million investment in the stock during the quarter. The other funds with brand new LAUR positions are Joseph Samuels's Islet Management, David Harding's Winton Capital Management, and Mike Vranos's Ellington.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Laureate Education, Inc. (NASDAQ:LAUR) but similarly valued. We will take a look at GrafTech International Ltd. (NYSE:EAF), Alcoa Corporation (NYSE:AA), Ardagh Group S.A. (NYSE:ARD), and Apple Hospitality REIT Inc (NYSE:APLE). This group of stocks' market values resemble LAUR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EAF,26,276282,-1 AA,28,530144,2 ARD,12,63888,1 APLE,12,106485,-2 Average,19.5,244200,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $244 million. That figure was $505 million in LAUR's case. Alcoa Corporation (NYSE:AA) is the most popular stock in this table. On the other hand Ardagh Group S.A. (NYSE:ARD) is the least popular one with only 12 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. 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 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. Unfortunately LAUR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on LAUR were disappointed as the stock returned 4.7% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.