Were Hedge Funds Right About Strategic Education Inc (STRA)?
In this article we will check out the progression of hedge fund sentiment towards Strategic Education Inc (NASDAQ:STRA) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Strategic Education Inc (NASDAQ:STRA) was in 16 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 23. STRA shareholders have witnessed an increase in activity from the world's largest hedge funds of late. There were 15 hedge funds in our database with STRA positions at the end of the fourth quarter. Our calculations also showed that STRA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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Jeffrey Ubben of ValueAct Capital
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Do Hedge Funds Think STRA Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in STRA over the last 23 quarters. So, let's see 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 Inclusive Capital, which reported holding $139.6 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $44.3 million position. Other investors bullish on the company included D E Shaw, AQR Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Inclusive Capital allocated the biggest weight to Strategic Education Inc (NASDAQ:STRA), around 10.38% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, earmarking 1.25 percent of its 13F equity portfolio to STRA.
As industrywide interest jumped, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the most valuable position in Strategic Education Inc (NASDAQ:STRA). Millennium Management had $2.1 million invested in the company at the end of the quarter. Bruce Kovner's Caxton Associates LP also made a $0.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Mika Toikka's AlphaCrest Capital Management and Dmitry Balyasny's Balyasny Asset Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Strategic Education Inc (NASDAQ:STRA) but similarly valued. These stocks are BTRS Holdings Inc. (NASDAQ:BTRS), Bionano Genomics, Inc. (NASDAQ:BNGO), Morphic Holding, Inc. (NASDAQ:MORF), Retail Properties of America Inc (NYSE:RPAI), Inter Parfums, Inc. (NASDAQ:IPAR), CareTrust REIT Inc (NASDAQ:CTRE), and Echostar Corporation (NASDAQ:SATS). All of these 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 BTRS,26,310999,26 BNGO,10,108374,5 MORF,22,425543,7 RPAI,9,29224,3 IPAR,9,88058,-3 CTRE,15,81732,-3 SATS,28,232110,-3 Average,17,182291,4.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $232 million in STRA's case. Echostar Corporation (NASDAQ:SATS) is the most popular stock in this table. On the other hand Retail Properties of America Inc (NYSE:RPAI) is the least popular one with only 9 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. Our overall hedge fund sentiment score for STRA is 45.3. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately STRA wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); STRA investors were disappointed as the stock returned -22.3% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
