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At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Lincoln Educational Services Corporation (NASDAQ:LINC) makes for a good investment right now.
Is LINC a good stock to buy now? Lincoln Educational Services Corporation (NASDAQ:LINC) was in 11 hedge funds' portfolios at the end of September. The all time high for this statistics is 6. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. LINC investors should pay attention to an increase in support from the world's most elite money managers in recent months. There were 5 hedge funds in our database with LINC positions at the end of the second quarter. Our calculations also showed that LINC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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 stocks that are in our short portfolio.
Wil Harkey of Nantahala Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now we're going to analyze the fresh hedge fund action encompassing Lincoln Educational Services Corporation (NASDAQ:LINC).
Do Hedge Funds Think LINC Is A Good Stock To Buy Now?
At third quarter's end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 120% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in LINC a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Lincoln Educational Services Corporation (NASDAQ:LINC) was held by Paradice Investment Management, which reported holding $12.6 million worth of stock at the end of September. It was followed by Alyeska Investment Group with a $12.3 million position. Other investors bullish on the company included Nantahala Capital Management, Renaissance Technologies, and Juniper Investment Company. In terms of the portfolio weights assigned to each position Juniper Investment Company allocated the biggest weight to Lincoln Educational Services Corporation (NASDAQ:LINC), around 3.3% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, earmarking 0.91 percent of its 13F equity portfolio to LINC.
Consequently, specific money managers were leading the bulls' herd. Manatuck Hill Partners, managed by Mark Broach, established the biggest position in Lincoln Educational Services Corporation (NASDAQ:LINC). Manatuck Hill Partners had $0.8 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $0.7 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel's Two Sigma Advisors, Donald Sussman's Paloma Partners, and Ken Griffin's Citadel Investment Group.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Lincoln Educational Services Corporation (NASDAQ:LINC) but similarly valued. These stocks are comScore, Inc. (NASDAQ:SCOR), American Realty Investors, Inc. (NYSE:ARL), Bel Fuse, Inc. (NASDAQ:BELFA), Lyra Therapeutics, Inc. (NASDAQ:LYRA), Western New England Bancorp, Inc. (NASDAQ:WNEB), First Internet Bancorp (NASDAQ:INBK), and L.B. Foster Company (NASDAQ:FSTR). This group of stocks' market values resemble LINC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SCOR,13,37592,-2 ARL,1,251,0 BELFA,4,4790,0 LYRA,6,53656,-2 WNEB,3,12969,-1 INBK,9,3929,1 FSTR,12,34741,0 Average,6.9,21133,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.9 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $45 million in LINC's case. comScore, Inc. (NASDAQ:SCOR) is the most popular stock in this table. On the other hand American Realty Investors, Inc. (NYSE:ARL) is the least popular one with only 1 bullish hedge fund positions. Lincoln Educational Services Corporation (NASDAQ:LINC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LINC is 81.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on LINC as the stock returned 20.7% since the end of Q3 (through 12/8) 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.