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As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Grand Canyon Education Inc (NASDAQ:LOPE).
Grand Canyon Education Inc (NASDAQ:LOPE) has experienced a decrease in support from the world's most elite money managers recently. Grand Canyon Education Inc (NASDAQ:LOPE) was in 24 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 35. There were 26 hedge funds in our database with LOPE holdings at the end of December. Our calculations also showed that LOPE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Tudor Jones of Tudor Investment Corp
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let's take a look at the latest hedge fund action surrounding Grand Canyon Education Inc (NASDAQ:LOPE).
Do Hedge Funds Think LOPE Is A Good Stock To Buy Now?
At Q1's end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in LOPE a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, Stadium Capital Management was the largest shareholder of Grand Canyon Education Inc (NASDAQ:LOPE), with a stake worth $39.5 million reported as of the end of March. Trailing Stadium Capital Management was Renaissance Technologies, which amassed a stake valued at $25.3 million. Intrinsic Edge Capital, Owls Nest Partners, and Montanaro Asset Management 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 Stadium Capital Management allocated the biggest weight to Grand Canyon Education Inc (NASDAQ:LOPE), around 18.43% of its 13F portfolio. Owls Nest Partners is also relatively very bullish on the stock, setting aside 12.4 percent of its 13F equity portfolio to LOPE.
Since Grand Canyon Education Inc (NASDAQ:LOPE) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of fund managers who sold off their positions entirely heading into Q2. It's worth mentioning that Scott Ferguson's Sachem Head Capital dumped the largest position of all the hedgies monitored by Insider Monkey, comprising an estimated $74.5 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund dropped about $6.8 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q2.
Let's now take a look at hedge fund activity in other stocks similar to Grand Canyon Education Inc (NASDAQ:LOPE). We will take a look at Petco Health and Wellness Company, Inc. (NASDAQ:WOOF), Companhia de Saneamento Básico do Estado de São Paulo - SABESP (NYSE:SBS), Grupo Televisa SAB (NYSE:TV), Beam Therapeutics Inc. (NASDAQ:BEAM), Webster Financial Corporation (NYSE:WBS), United Bankshares, Inc. (NASDAQ:UBSI), and Allogene Therapeutics, Inc. (NASDAQ:ALLO). This group of stocks' market caps match LOPE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WOOF,25,201907,25 SBS,10,265538,-2 TV,15,752577,-5 BEAM,18,956334,4 WBS,27,431270,1 UBSI,9,44083,0 ALLO,19,282736,1 Average,17.6,419206,3.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $419 million. That figure was $196 million in LOPE's case. Webster Financial Corporation (NYSE:WBS) is the most popular stock in this table. On the other hand United Bankshares, Inc. (NASDAQ:UBSI) 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 65.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately LOPE wasn't nearly as popular as these 5 stocks and hedge funds that were betting on LOPE were disappointed as the stock returned -16.7% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.