Is Laureate Education, Inc. (NASDAQ:LAUR) 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, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
Laureate Education, Inc. (NASDAQ:LAUR) was in 24 hedge funds' portfolios at the end of December. LAUR has experienced an increase in activity from the world's largest hedge funds lately. There were 20 hedge funds in our database with LAUR positions at the end of the previous quarter. Our calculations also showed that laur isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to take a look at the key hedge fund action encompassing Laureate Education, Inc. (NASDAQ:LAUR).
How have hedgies been trading Laureate Education, Inc. (NASDAQ:LAUR)?
Heading into the first quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the second quarter of 2018. By comparison, 10 hedge funds held shares or bullish call options in LAUR a year ago. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
More specifically, Melvin Capital Management was the largest shareholder of Laureate Education, Inc. (NASDAQ:LAUR), with a stake worth $88.4 million reported as of the end of September. Trailing Melvin Capital Management was 12 West Capital Management, which amassed a stake valued at $87.1 million. Ailanthus Capital Management, Nut Tree Capital, and Prince Street Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key hedge funds have jumped into Laureate Education, Inc. (NASDAQ:LAUR) headfirst. Nut Tree Capital, managed by Jared Nussbaum, initiated the most valuable position in Laureate Education, Inc. (NASDAQ:LAUR). Nut Tree Capital had $15 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also initiated a $3.2 million position during the quarter. The following funds were also among the new LAUR investors: Minhua Zhang's Weld Capital Management, Benjamin A. Smith's Laurion Capital Management, and Cliff Asness's AQR Capital Management.
Let's now review hedge fund activity in other stocks similar to Laureate Education, Inc. (NASDAQ:LAUR). We will take a look at American Eagle Outfitters Inc. (NYSE:AEO), Nu Skin Enterprises, Inc. (NYSE:NUS), Wright Medical Group N.V. (NASDAQ:WMGI), and Silicon Laboratories Inc. (NASDAQ:SLAB). All of these stocks' market caps are similar to LAUR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AEO,27,401197,1 NUS,24,228123,6 WMGI,33,822338,-2 SLAB,17,58266,3 Average,25.25,377481,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $377 million. That figure was $274 million in LAUR's case. Wright Medical Group N.V. (NASDAQ:WMGI) is the most popular stock in this table. On the other hand Silicon Laboratories Inc. (NASDAQ:SLAB) is the least popular one with only 17 bullish hedge fund positions. Laureate Education, Inc. (NASDAQ:LAUR) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately LAUR wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); LAUR investors were disappointed as the stock returned 2.2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.