We can judge whether Career Education Corporation (NASDAQ:CECO) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Career Education (NASDAQ:CECO) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds' portfolios at the end of September. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Tortoise Energy Infrastructure Corporation (NYSE:TYG), Theravance Biopharma Inc (NASDAQ:TBPH), and Neenah, Inc. (NYSE:NP) to gather more data points. Our calculations also showed that CECO 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.
To the average investor there are dozens of signals market participants have at their disposal to assess stocks. A couple of the most under-the-radar signals are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can trounce the S&P 500 by a solid amount (see the details here).
[caption id="attachment_140292" align="aligncenter" width="424"] Israel Englander of Millennium Management[/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 review the new hedge fund action encompassing Career Education Corporation (NASDAQ:CECO).
What have hedge funds been doing with Career Education Corporation (NASDAQ:CECO)?
Heading into the fourth quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 17 hedge funds with a bullish position in CECO a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Career Education Corporation (NASDAQ:CECO), which was worth $76.2 million at the end of the third quarter. On the second spot was D E Shaw which amassed $23.3 million worth of shares. SG Capital Management, Millennium Management, and Tenzing Global Investors 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 Tenzing Global Investors allocated the biggest weight to Career Education Corporation (NASDAQ:CECO), around 8.17% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, dishing out 4.34 percent of its 13F equity portfolio to CECO.
Since Career Education Corporation (NASDAQ:CECO) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of fund managers that slashed their entire stakes by the end of the third quarter. Intriguingly, Richard Driehaus's Driehaus Capital dumped the biggest investment of all the hedgies monitored by Insider Monkey, totaling close to $7.7 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also dropped its stock, about $0.6 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Career Education Corporation (NASDAQ:CECO). We will take a look at Tortoise Energy Infrastructure Corporation (NYSE:TYG), Theravance Biopharma Inc (NASDAQ:TBPH), Neenah, Inc. (NYSE:NP), and Enterprise Financial Services Corp (NASDAQ:EFSC). This group of stocks' market values match CECO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TYG,1,764,0 TBPH,6,427868,-2 NP,8,14953,1 EFSC,12,56533,-1 Average,6.75,125030,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $200 million in CECO's case. Enterprise Financial Services Corp (NASDAQ:EFSC) is the most popular stock in this table. On the other hand Tortoise Energy Infrastructure Corporation (NYSE:TYG) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Career Education Corporation (NASDAQ:CECO) is more popular among hedge funds. 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 CECO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CECO were disappointed as the stock returned 5% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.