We can judge whether New Oriental Education & Tech Group Inc. (NYSE:EDU) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is New Oriental Education & Tech Group Inc. (NYSE:EDU) a sound investment today? Prominent investors are in a bullish mood. The number of bullish hedge fund positions rose by 3 recently. Our calculations also showed that EDU isn't among the 30 most popular stocks among hedge funds. EDU was in 28 hedge funds' portfolios at the end of the first quarter of 2019. There were 25 hedge funds in our database with EDU positions at the end of the previous quarter.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the fresh hedge fund action regarding New Oriental Education & Tech Group Inc. (NYSE:EDU).
Hedge fund activity in New Oriental Education & Tech Group Inc. (NYSE:EDU)
At Q1's end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EDU over the last 15 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in New Oriental Education & Tech Group Inc. (NYSE:EDU) was held by Tiger Global Management, which reported holding $212 million worth of stock at the end of March. It was followed by Kylin Management with a $126 million position. Other investors bullish on the company included Melvin Capital Management, Two Sigma Advisors, and Alkeon Capital Management.
As one would reasonably expect, specific money managers have been driving this bullishness. Alkeon Capital Management, managed by Panayotis Takis Sparaggis, assembled the most valuable position in New Oriental Education & Tech Group Inc. (NYSE:EDU). Alkeon Capital Management had $76.8 million invested in the company at the end of the quarter. Pasco Alfaro / Richard Tumure's Miura Global Management also initiated a $63.1 million position during the quarter. The other funds with brand new EDU positions are Louis Bacon's Moore Global Investments, Gabriel Plotkin's Melvin Capital Management, and Steve Cohen's Point72 Asset Management.
Let's also examine hedge fund activity in other stocks similar to New Oriental Education & Tech Group Inc. (NYSE:EDU). We will take a look at American Airlines Group Inc (NASDAQ:AAL), Western Midstream Partners, LP (NYSE:WES), Xylem Inc (NYSE:XYL), and CDW Corporation (NASDAQ:CDW). This group of stocks' market values are closest to EDU's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AAL,41,2032858,-4 WES,8,136200,1 XYL,13,520900,-5 CDW,28,1148152,2 Average,22.5,959528,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $960 million. That figure was $933 million in EDU's case. American Airlines Group Inc (NASDAQ:AAL) is the most popular stock in this table. On the other hand Western Gas Partners, LP (NYSE:WES) is the least popular one with only 8 bullish hedge fund positions. New Oriental Education & Tech Group Inc. (NYSE:EDU) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately EDU wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EDU were disappointed as the stock returned -6.6% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.