We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Scholastic Corp (NASDAQ:SCHL).
Scholastic Corp (NASDAQ:SCHL) was in 16 hedge funds' portfolios at the end of September. SCHL investors should pay attention to an increase in support from the world's most elite money managers in recent months. There were 14 hedge funds in our database with SCHL positions at the end of the previous quarter. Our calculations also showed that SCHL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are perceived as slow, old investment tools of yesteryear. While there are more than 8000 funds with their doors open at present, Our experts hone in on the elite of this club, approximately 750 funds. These money managers shepherd the majority of the smart money's total capital, and by following their unrivaled investments, Insider Monkey has discovered numerous investment strategies that have historically beaten the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_193003" align="alignnone" width="600"] Chuck Royce of Royce & Associates[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's review the latest hedge fund action regarding Scholastic Corp (NASDAQ:SCHL).
What does smart money think about Scholastic Corp (NASDAQ:SCHL)?
Heading into the fourth quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SCHL over the last 17 quarters. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Scholastic Corp (NASDAQ:SCHL) was held by Royce & Associates, which reported holding $64.4 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $3.3 million position. Other investors bullish on the company included Winton Capital Management, D E Shaw, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Scholastic Corp (NASDAQ:SCHL), around 0.6% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.46 percent of its 13F equity portfolio to SCHL.
As industrywide interest jumped, key hedge funds were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Scholastic Corp (NASDAQ:SCHL). Arrowstreet Capital had $3.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace also initiated a $0.9 million position during the quarter. The following funds were also among the new SCHL investors: Dmitry Balyasny's Balyasny Asset Management, Michael Gelband's ExodusPoint Capital, and Hoon Kim's Quantinno Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Scholastic Corp (NASDAQ:SCHL) but similarly valued. These stocks are Cooper Tire & Rubber Company (NYSE:CTB), Green Dot Corporation (NYSE:GDOT), Aimmune Therapeutics Inc (NASDAQ:AIMT), and Conduent Incorporated (NYSE:CNDT). All of these stocks' market caps match SCHL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTB,18,135042,3 GDOT,20,192467,2 AIMT,20,192504,7 CNDT,30,418046,3 Average,22,234515,3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $235 million. That figure was $78 million in SCHL's case. Conduent Incorporated (NYSE:CNDT) is the most popular stock in this table. On the other hand Cooper Tire & Rubber Company (NYSE:CTB) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Scholastic Corp (NASDAQ:SCHL) is even less popular than CTB. Hedge funds dodged a bullet by taking a bearish stance towards SCHL. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SCHL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SCHL investors were disappointed as the stock returned -1.3% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.