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Hedge Funds Are Selling OneSmart International Education Group Limited (ONE)

·6 min read

In this article we will take a look at whether hedge funds think OneSmart International Education Group Limited (NYSE:ONE) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

OneSmart International Education Group Limited (NYSE:ONE) investors should be aware of a decrease in support from the world's most elite money managers recently. ONE was in 7 hedge funds' portfolios at the end of March. There were 8 hedge funds in our database with ONE holdings at the end of the previous quarter. Our calculations also showed that ONE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_26088" align="aligncenter" width="393"]

Chase Coleman of Tiger Global[/caption]

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to analyze the recent hedge fund action surrounding OneSmart International Education Group Limited (NYSE:ONE).

How have hedgies been trading OneSmart International Education Group Limited (NYSE:ONE)?

At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in ONE over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Yiheng Capital held the most valuable stake in OneSmart International Education Group Limited (NYSE:ONE), which was worth $37.7 million at the end of the third quarter. On the second spot was Indus Capital which amassed $14.5 million worth of shares. Old Well Partners, Renaissance Technologies, and Tiger Global Management LLC 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 Old Well Partners allocated the biggest weight to OneSmart International Education Group Limited (NYSE:ONE), around 5.92% of its 13F portfolio. Yiheng Capital is also relatively very bullish on the stock, earmarking 2.97 percent of its 13F equity portfolio to ONE.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Sensato Capital Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified ONE as a viable investment and initiated a position in the stock.

Let's also examine hedge fund activity in other stocks similar to OneSmart International Education Group Limited (NYSE:ONE). These stocks are Cadence Bancorporation (NYSE:CADE), Rite Aid Corporation (NYSE:RAD), istar Inc (NYSE:STAR), and Cooper Tire & Rubber Company (NYSE:CTB). This group of stocks' market valuations match ONE's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CADE,29,66003,7 RAD,16,45558,6 STAR,14,111654,-1 CTB,20,83606,3 Average,19.75,76705,3.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $64 million in ONE's case. Cadence Bancorporation (NYSE:CADE) is the most popular stock in this table. On the other hand istar Inc (NYSE:STAR) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks OneSmart International Education Group Limited (NYSE:ONE) is even less popular than STAR. Hedge funds dodged a bullet by taking a bearish stance towards ONE. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately ONE wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ONE investors were disappointed as the stock returned -17.5% during the second quarter (through June 10th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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

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