The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded New Oriental Education & Technology Group Inc. (NYSE:EDU) based on those filings.
Is New Oriental Education & Technology Group Inc. (NYSE:EDU) undervalued? The smart money was becoming hopeful. The number of long hedge fund positions improved by 2 recently. New Oriental Education & Technology Group Inc. (NYSE:EDU) was in 45 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 50. Our calculations also showed that EDU isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 43 hedge funds in our database with EDU positions at the end of the fourth quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Rajiv Jain of GQG Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 homepage. Now we’re going to take a look at the key hedge fund action encompassing New Oriental Education & Technology Group Inc. (NYSE:EDU).
Do Hedge Funds Think EDU Is A Good Stock To Buy Now?
At first quarter’s end, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EDU over the last 23 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in New Oriental Education & Technology Group Inc. (NYSE:EDU) was held by D1 Capital Partners, which reported holding $350.5 million worth of stock at the end of December. It was followed by GQG Partners with a $319.8 million position. Other investors bullish on the company included Tiger Global Management LLC, Farallon Capital, and Alkeon Capital Management. In terms of the portfolio weights assigned to each position Serenity Capital allocated the biggest weight to New Oriental Education & Technology Group Inc. (NYSE:EDU), around 42.13% of its 13F portfolio. Kylin Management is also relatively very bullish on the stock, designating 18.73 percent of its 13F equity portfolio to EDU.
As industrywide interest jumped, some big names were breaking ground themselves. Thunderbird Partners, managed by David Fear, established the most valuable position in New Oriental Education & Technology Group Inc. (NYSE:EDU). Thunderbird Partners had $16.7 million invested in the company at the end of the quarter. Eduardo Costa’s Calixto Global Investors also made a $14.7 million investment in the stock during the quarter. The other funds with brand new EDU positions are Matthew Hulsizer’s PEAK6 Capital Management, Campbell Wilson’s Old Well Partners, and Daryl Smith’s Kayak Investment Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as New Oriental Education & Technology Group Inc. (NYSE:EDU) but similarly valued. These stocks are Kansas City Southern (NYSE:KSU), Nucor Corporation (NYSE:NUE), Franco-Nevada Corporation (NYSE:FNV), Fortive Corporation (NYSE:FTV), The Hartford Financial Services Group Inc (NYSE:HIG), Itau Unibanco Holding SA (NYSE:ITUB), and Trip.com Group Limited (NASDAQ:TCOM). All of these stocks’ market caps are closest to EDU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KSU | 49 | 1662353 | 0 |
| NUE | 25 | 191827 | -4 |
| FNV | 20 | 933238 | -7 |
| FTV | 27 | 1696539 | -6 |
| HIG | 57 | 1860836 | 21 |
| ITUB | 12 | 180456 | -7 |
| TCOM | 35 | 2144297 | 1 |
| Average | 32.1 | 1238507 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $1239 million. That figure was $2188 million in EDU’s case. The Hartford Financial Services Group Inc (NYSE:HIG) is the most popular stock in this table. On the other hand Itau Unibanco Holding SA (NYSE:ITUB) is the least popular one with only 12 bullish hedge fund positions. New Oriental Education & Technology Group Inc. (NYSE:EDU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EDU is 70.7. 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 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 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately EDU wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on EDU were disappointed as the stock returned -45.8% since the end of March (through 6/18) 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 many of these stocks already outperformed the market since 2019.
Follow New Oriental Education & Technology Group Inc. (NYSE:EDU)
Follow New Oriental Education & Technology Group Inc. (NYSE:EDU)
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Disclosure: None. This article was originally published at Insider Monkey.
