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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about TAL Education Group (NYSE:TAL).
Is TAL a good stock to buy now? TAL Education Group (NYSE:TAL) was in 41 hedge funds' portfolios at the end of September. The all time high for this statistic is 40. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. TAL shareholders have witnessed an increase in hedge fund interest of late. There were 40 hedge funds in our database with TAL holdings at the end of June. Our calculations also showed that TAL 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.
To the average investor there are several indicators market participants can use to appraise their stock investments. Some of the most useful indicators are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top investment managers can outpace the market by a very impressive amount (see the details here).
Louis Bacon Moore of Moore Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind we're going to take a gander at the key hedge fund action regarding TAL Education Group (NYSE:TAL).
Do Hedge Funds Think TAL Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards TAL over the last 21 quarters. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Tiger Global Management LLC held the most valuable stake in TAL Education Group (NYSE:TAL), which was worth $438.2 million at the end of the third quarter. On the second spot was Yiheng Capital which amassed $332.7 million worth of shares. Hillhouse Capital Management, Serenity Capital, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Serenity Capital allocated the biggest weight to TAL Education Group (NYSE:TAL), around 32.94% of its 13F portfolio. Yiheng Capital is also relatively very bullish on the stock, earmarking 20.04 percent of its 13F equity portfolio to TAL.
Consequently, key money managers were leading the bulls' herd. Moore Global Investments, managed by Louis Bacon, created the most valuable position in TAL Education Group (NYSE:TAL). Moore Global Investments had $23.4 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $22.2 million position during the quarter. The following funds were also among the new TAL investors: Ken Griffin's Citadel Investment Group, Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital), and Matthew Hulsizer's PEAK6 Capital Management.
Let's check out hedge fund activity in other stocks similar to TAL Education Group (NYSE:TAL). We will take a look at Spotify Technology S.A. (NYSE:SPOT), Illumina, Inc. (NASDAQ:ILMN), Atlassian Corporation Plc (NASDAQ:TEAM), Biogen Inc. (NASDAQ:BIIB), Westpac Banking Corporation (NYSE:WBK), Relx PLC (NYSE:RELX), and Analog Devices, Inc. (NASDAQ:ADI). This group of stocks' market valuations are similar to TAL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SPOT,44,1641764,8 ILMN,44,1373332,3 TEAM,48,3228678,-7 BIIB,59,3236819,-4 WBK,4,25293,0 RELX,6,114897,0 ADI,52,3649787,3 Average,36.7,1895796,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.7 hedge funds with bullish positions and the average amount invested in these stocks was $1896 million. That figure was $2137 million in TAL's case. Biogen Inc. (NASDAQ:BIIB) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. TAL Education Group (NYSE:TAL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TAL is 69.6. 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. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately TAL wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TAL were disappointed as the stock returned -10.6% since the end of September (through 12/14) 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 this year.
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Disclosure: None. This article was originally published at Insider Monkey.