Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Grand Canyon Education Inc (NASDAQ:LOPE).
Grand Canyon Education Inc (NASDAQ:LOPE) was in 21 hedge funds' portfolios at the end of the fourth quarter of 2018. LOPE has seen a decrease in enthusiasm from smart money lately. There were 24 hedge funds in our database with LOPE holdings at the end of the previous quarter. Our calculations also showed that lope isn't among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a gander at the new hedge fund action regarding Grand Canyon Education Inc (NASDAQ:LOPE).
What have hedge funds been doing with Grand Canyon Education Inc (NASDAQ:LOPE)?
Heading into the first quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LOPE over the last 14 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Grand Canyon Education Inc (NASDAQ:LOPE), with a stake worth $101.6 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $24 million. Citadel Investment Group, Sabrepoint Capital, and Gotham Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Grand Canyon Education Inc (NASDAQ:LOPE) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there was a specific group of funds that elected to cut their full holdings heading into Q3. It's worth mentioning that Andrew Feldstein and Stephen Siderow's Blue Mountain Capital dumped the largest investment of the "upper crust" of funds tracked by Insider Monkey, worth about $4.1 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also dumped its stock, about $1.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 3 funds heading into Q3.
Let's also examine 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 PLDT Inc. (NYSE:PHI), New York Community Bancorp, Inc. (NYSE:NYCB), New Relic Inc (NYSE:NEWR), and ADT Inc. (NYSE:ADT). This group of stocks' market values are similar to LOPE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PHI,5,62624,2 NYCB,15,133605,3 NEWR,28,446480,0 ADT,15,62341,-4 Average,15.75,176263,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $176 million. That figure was $212 million in LOPE's case. New Relic Inc (NYSE:NEWR) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 5 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 calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on LOPE as the stock returned 23.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.