Does OneSmart International Education Group Limited (NYSE:ONE) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
OneSmart International Education Group Limited (NYSE:ONE) was in 7 hedge funds' portfolios at the end of June. ONE has experienced an increase in enthusiasm from smart money in recent months. There were 6 hedge funds in our database with ONE positions at the end of the previous quarter. Our calculations also showed that ONE isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' 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 40 percentage points since May 2014 through May 30, 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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the latest hedge fund action regarding OneSmart International Education Group Limited (NYSE:ONE).
What does smart money think about OneSmart International Education Group Limited (NYSE:ONE)?
At the end of the second quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the first quarter of 2019. On the other hand, there were a total of 6 hedge funds with a bullish position in ONE a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Yiheng Capital, managed by Jonathan Guo, holds the largest position in OneSmart International Education Group Limited (NYSE:ONE). Yiheng Capital has a $31 million position in the stock, comprising 3.7% of its 13F portfolio. Coming in second is Indus Capital, led by David Kowitz and Sheldon Kasowitz, holding a $11.7 million position; 1.9% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish include Renaissance Technologies, Chase Coleman's Tiger Global Management LLC and Israel Englander's Millennium Management.
As aggregate interest increased, key money managers were leading the bulls' herd. Citadel Investment Group, managed by Ken Griffin, assembled the most outsized position in OneSmart International Education Group Limited (NYSE:ONE). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.
Let's check out hedge fund activity in other stocks similar to OneSmart International Education Group Limited (NYSE:ONE). We will take a look at Sangamo Therapeutics, Inc. (NASDAQ:SGMO), PBF Logistics LP (NYSE:PBFX), Ferro Corporation (NYSE:FOE), and Gibraltar Industries Inc (NASDAQ:ROCK). This group of stocks' market values are similar to ONE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SGMO,17,69348,-2 PBFX,3,2502,1 FOE,14,155533,-2 ROCK,10,95650,-4 Average,11,80758,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $50 million in ONE's case. Sangamo Therapeutics, Inc. (NASDAQ:SGMO) is the most popular stock in this table. On the other hand PBF Logistics LP (NYSE:PBFX) is the least popular one with only 3 bullish hedge fund positions. OneSmart International Education Group Limited(NYSE:ONE) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ONE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ONE investors were disappointed as the stock returned -7.2% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.