We started seeing tectonic shifts in the market during the third quarter. Small-cap stocks underperformed the large-cap stocks by more than 10 percentage points between the end of June 2015 and the end of June 2016. A mean reversion in trends bumped small-cap stocks’ return to almost 9% in Q3, outperforming their large-cap peers by 5 percentage points. The momentum in small-cap space hasn’t subsided during this quarter either. Small-cap stocks beat large-cap stocks by another 5 percentage points during the first 7 weeks of this quarter. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were boosting their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards TAL Education Group (ADR) (NYSE:XRS).
TAL Education Group (ADR) (NYSE:XRS) has experienced an increase in enthusiasm from smart money recently. XRS was in 24 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with XRS holdings at the end of the previous quarter. At the end of this article we will also compare XRS to other stocks including Robert Half International Inc. (NYSE:RHI), Edgewell Personal Care Company (NYSE:EPC), and Godaddy Inc (NYSE:GDDY) to get a better sense of its popularity.
Follow Tal Education Group (NYSE:TAL)
Follow Tal Education Group (NYSE:TAL)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Sarawut Aiemsinsuk/Shutterstock.com
How have hedgies been trading TAL Education Group (ADR) (NYSE:XRS)?
Heading into the fourth quarter of 2016, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 60% jump from the previous quarter. Hedge funds now own 4.70% of TAL Education’s float. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Serenity Capital, managed by Wang Chen, holds the number one position in TAL Education Group (ADR) (NYSE:XRS). Serenity Capital has a $71.8 million position in the stock, comprising 23.6% of its 13F portfolio. Coming in second is Ariose Capital, managed by Yi Xin, which holds a $65.1 million position; 17.8% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish comprise Lei Zhang’s Hillhouse Capital Management, Jeffrey Altman’s Owl Creek Asset Management, and Larry Chen and Terry Zhang’s Tairen Capital.
Consequently, key money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, created the largest position in TAL Education Group (ADR) (NYSE:XRS). Balyasny Asset Management had $27.4 million invested in the company at the end of the quarter. Fang Zheng’s Keywise Capital Management also made a $10.6 million investment in the stock during the quarter. The following funds were also among the new XRS investors: Noam Gottesman’s GLG Partners, Steve Cohen’s Point72 Asset Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as TAL Education Group (ADR) (NYSE:XRS) but similarly valued. We will take a look at Robert Half International Inc. (NYSE:RHI), Edgewell Personal Care Company (NYSE:EPC), Godaddy Inc (NYSE:GDDY), and Sonoco Products Company (NYSE:SON). This group of stocks’ market valuations are closest to XRS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RHI | 21 | 252953 | -5 |
| EPC | 25 | 509443 | -7 |
| GDDY | 23 | 1283096 | 0 |
| SON | 17 | 88252 | 1 |
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $533 million. That figure was $341 million in XRS’ case. Edgewell Personal Care Company (NYSE:EPC) is the most popular stock in this table. On the other hand Sonoco Products Company (NYSE:SON) is the least popular one with only 17 bullish hedge fund positions. TAL Education Group (ADR) (NYSE:XRS) is not the most popular stock in this group but hedge fund interest is still above average and growing. This is a slightly positive signal, as we’d rather spend our time researching stocks that hedge funds are piling on. In this regard XRS might make a good candidate to consider a long position in.
Disclosure: None
