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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Laureate Education, Inc. (NASDAQ:LAUR).
Is Laureate Education, Inc. (NASDAQ:LAUR) the right investment to pursue these days? The best stock pickers were selling. The number of long hedge fund positions dropped by 1 in recent months. Laureate Education, Inc. (NASDAQ:LAUR) was in 20 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 34. Our calculations also showed that LAUR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Arnaud Ajdler of Engine Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let's go over the key hedge fund action surrounding Laureate Education, Inc. (NASDAQ:LAUR).
Do Hedge Funds Think LAUR Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in LAUR a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Laureate Education, Inc. (NASDAQ:LAUR) was held by Moore Global Investments, which reported holding $38.2 million worth of stock at the end of June. It was followed by Redwood Capital Management with a $38.1 million position. Other investors bullish on the company included Nut Tree Capital, Maple Rock Capital, and Park West Asset Management. In terms of the portfolio weights assigned to each position Nut Tree Capital allocated the biggest weight to Laureate Education, Inc. (NASDAQ:LAUR), around 6.93% of its 13F portfolio. Ararat Capital is also relatively very bullish on the stock, setting aside 4.4 percent of its 13F equity portfolio to LAUR.
Since Laureate Education, Inc. (NASDAQ:LAUR) has faced falling interest from the entirety of the hedge funds we track, it's easy to see that there is a sect of fund managers that decided to sell off their positions entirely last quarter. Intriguingly, Joel Greenblatt's Gotham Asset Management dropped the biggest stake of the "upper crust" of funds followed by Insider Monkey, valued at close to $1.3 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also sold off its stock, about $0.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Laureate Education, Inc. (NASDAQ:LAUR). These stocks are Nu Skin Enterprises, Inc. (NYSE:NUS), FormFactor, Inc. (NASDAQ:FORM), GrowGeneration Corp. (NASDAQ:GRWG), Arcosa, Inc. (NYSE:ACA), Brinker International, Inc. (NYSE:EAT), California Water Service Group (NYSE:CWT), and Atai Life Sciences N.V. (NASDAQ:ATAI). This group of stocks' market values are closest to LAUR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NUS,20,298814,1 FORM,20,167474,3 GRWG,17,128612,-1 ACA,12,155930,-5 EAT,31,353266,0 CWT,9,101040,1 ATAI,20,141677,17 Average,18.4,192402,2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $204 million in LAUR's case. Brinker International, Inc. (NYSE:EAT) is the most popular stock in this table. On the other hand California Water Service Group (NYSE:CWT) is the least popular one with only 9 bullish hedge fund positions. Laureate Education, Inc. (NASDAQ:LAUR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LAUR is 46.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on LAUR as the stock returned 19.4% since the end of Q2 (through 10/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.