The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article we look at what those investors think of China Online Education Group (NYSE:COE).
Hedge fund interest in China Online Education Group (NYSE:COE) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Quarterhill Inc. (NASDAQ:QTRH), Neuronetics, Inc. (NASDAQ:STIM), and First Financial Northwest, Inc. (NASDAQ:FFNW) to gather more data points. Our calculations also showed that COE 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.
If you'd ask most investors, hedge funds are assumed to be slow, outdated financial vehicles of the past. While there are over 8000 funds with their doors open at present, Our researchers choose to focus on the leaders of this group, about 750 funds. These money managers shepherd bulk of the smart money's total capital, and by tracking their best investments, Insider Monkey has determined several investment strategies that have historically outstripped Mr. Market. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_699750" align="aligncenter" width="473"] Gifford Combs of Dalton Investments[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind let's review the recent hedge fund action regarding China Online Education Group (NYSE:COE).
What have hedge funds been doing with China Online Education Group (NYSE:COE)?
Heading into the fourth quarter of 2019, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 3 hedge funds held shares or bullish call options in COE a year ago. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Sylebra Capital Management, managed by Daniel Patrick Gibson, holds the most valuable position in China Online Education Group (NYSE:COE). Sylebra Capital Management has a $2.1 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Indus Capital, led by David Kowitz and Sheldon Kasowitz, holding a $1.9 million position; 0.3% of its 13F portfolio is allocated to the stock. Other peers with similar optimism contain Gifford Combs's Dalton Investments, Renaissance Technologies and . In terms of the portfolio weights assigned to each position Dalton Investments allocated the biggest weight to China Online Education Group (NYSE:COE), around 0.53% of its 13F portfolio. Indus Capital is also relatively very bullish on the stock, earmarking 0.32 percent of its 13F equity portfolio to COE.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's also examine hedge fund activity in other stocks similar to China Online Education Group (NYSE:COE). These stocks are Quarterhill Inc. (NASDAQ:QTRH), Neuronetics, Inc. (NASDAQ:STIM), First Financial Northwest, Inc. (NASDAQ:FFNW), and Ramaco Resources, Inc. (NASDAQ:METC). This group of stocks' market caps are closest to COE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QTRH,3,3762,0 STIM,6,4361,1 FFNW,1,9976,-1 METC,7,3455,1 Average,4.25,5389,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $5 million in COE's case. Ramaco Resources, Inc. (NASDAQ:METC) is the most popular stock in this table. On the other hand First Financial Northwest, Inc. (NASDAQ:FFNW) is the least popular one with only 1 bullish hedge fund positions. China Online Education Group (NYSE:COE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 COE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); COE investors were disappointed as the stock returned -10.3% 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.