Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the nearly unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Strategic Education Inc (NASDAQ:STRA) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds' portfolios at the end of the second quarter of 2019. At the end of this article we will also compare STRA to other stocks including Cushman & Wakefield plc (NYSE:CWK), Pure Storage, Inc. (NYSE:PSTG), and Mattel, Inc. (NASDAQ:MAT) to get a better sense of its popularity. Our calculations also showed that STRA isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' 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 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 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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to review the new hedge fund action encompassing Strategic Education Inc (NASDAQ:STRA).
What have hedge funds been doing with Strategic Education Inc (NASDAQ:STRA)?
At Q2's end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in STRA over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Strategic Education Inc (NASDAQ:STRA) was held by Renaissance Technologies, which reported holding $100.4 million worth of stock at the end of March. It was followed by Columbus Circle Investors with a $43.6 million position. Other investors bullish on the company included ValueAct Capital, G2 Investment Partners Management, and Driehaus Capital.
Due to the fact that Strategic Education Inc (NASDAQ:STRA) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there exists a select few money managers that decided to sell off their full holdings by the end of the second quarter. It's worth mentioning that Ken Grossman and Glen Schneider's SG Capital Management dropped the largest stake of all the hedgies followed by Insider Monkey, worth about $6.8 million in stock, and Matthew Drapkin and Steven R. Becker's Becker Drapkin Management was right behind this move, as the fund dumped about $2.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Strategic Education Inc (NASDAQ:STRA) but similarly valued. These stocks are Cushman & Wakefield plc (NYSE:CWK), Pure Storage, Inc. (NYSE:PSTG), Mattel, Inc. (NASDAQ:MAT), and John Bean Technologies Corporation (NYSE:JBT). This group of stocks' market caps are closest to STRA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CWK,14,159437,-12 PSTG,23,561696,2 MAT,16,650888,-5 JBT,10,101572,1 Average,15.75,368398,-3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $368 million. That figure was $208 million in STRA's case. Pure Storage, Inc. (NYSE:PSTG) is the most popular stock in this table. On the other hand John Bean Technologies Corporation (NYSE:JBT) is the least popular one with only 10 bullish hedge fund positions. Strategic Education Inc (NASDAQ:STRA) 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 STRA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); STRA investors were disappointed as the stock returned -23.4% 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.
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