Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by 4 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at RISE Education Cayman Ltd (NASDAQ:REDU) from the perspective of those elite funds.
Is RISE Education Cayman Ltd (NASDAQ:REDU) a healthy stock for your portfolio? Investors who are in the know are betting on the stock. The number of long hedge fund positions moved up by 3 recently. Our calculations also showed that REDU isn't among the 30 most popular stocks among hedge funds (see the video below). REDU was in 6 hedge funds' portfolios at the end of June. There were 3 hedge funds in our database with REDU holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are several signals market participants use to evaluate stocks. Two of the most innovative signals are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the elite money managers can beat the market by a superb margin (see the details here).
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let's take a glance at the key hedge fund action surrounding RISE Education Cayman Ltd (NASDAQ:REDU).
How are hedge funds trading RISE Education Cayman Ltd (NASDAQ:REDU)?
At the end of the second quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in REDU over the last 16 quarters. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Tiger Global Management LLC was the largest shareholder of RISE Education Cayman Ltd (NASDAQ:REDU), with a stake worth $4.8 million reported as of the end of March. Trailing Tiger Global Management LLC was Renaissance Technologies, which amassed a stake valued at $0.9 million. Citadel Investment Group, D E Shaw, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, some big names were leading the bulls' herd. D E Shaw, managed by D. E. Shaw, created the most outsized position in RISE Education Cayman Ltd (NASDAQ:REDU). D E Shaw had $0.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new REDU position is Israel Englander's Millennium Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as RISE Education Cayman Ltd (NASDAQ:REDU) but similarly valued. We will take a look at Nexgen Energy Ltd. (NYSE:NXE), One Liberty Properties, Inc. (NYSE:OLP), Gran Tierra Energy Inc. (NYSEAMEX:GTE), and Energy Recovery, Inc. (NASDAQ:ERII). This group of stocks' market values match REDU's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NXE,8,27179,0 OLP,4,29008,0 GTE,13,217180,-3 ERII,10,50526,1 Average,8.75,80973,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $6 million in REDU's case. Gran Tierra Energy Inc. (NYSEAMEX:GTE) is the most popular stock in this table. On the other hand One Liberty Properties, Inc. (NYSE:OLP) is the least popular one with only 4 bullish hedge fund positions. RISE Education Cayman Ltd (NASDAQ:REDU) 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 REDU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); REDU investors were disappointed as the stock returned -12.2% 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.