Hedge Funds Are Dumping Lincoln Educational Services Corporation (LINC)

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Lincoln Educational Services Corporation (NASDAQ:LINC).

Is Lincoln Educational Services Corporation (NASDAQ:LINC) an outstanding investment today? The stock plunged by 74% in the third quarter, but most investors from our database chose to stick to their holdings. In this way, the number of long hedge fund positions went down by 1 and 6 funds reported holding shares of the company.

At the end of this article we will also compare LINC to other stocks, including Forbes Energy Services Ltd. (NASDAQ:FES), MELA Sciences Inc (NASDAQ:MELA), and Wave Systems Corp. (NASDAQ:WAVX) to get a better sense of its popularity.

In the eyes of most investors, hedge funds are seen as underperforming, old investment tools of the past. While there are over 8000 funds trading at the moment, Our experts choose to focus on the leaders of this club, about 700 funds. It is estimated that this group of investors commands the majority of all hedge funds’ total capital, and by monitoring their matchless picks, Insider Monkey has come up with a few investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, let’s review the recent action surrounding Lincoln Educational Services Corporation (NASDAQ:LINC).

Hedge fund activity in Lincoln Educational Services Corporation (NASDAQ:LINC)

When looking at the institutional investors followed by Insider Monkey, Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, holds the number one position in Lincoln Educational Services Corporation (NASDAQ:LINC), which was worth $1.2 million, comprising 0.2% of its 13F portfolio at the end of September. Sitting at the No. 2 spot is Royce & Associates, led by Chuck Royce, holding a $0.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism encompass Anand Parekh’s Alyeska Investment Group, Phil Frohlich’s Prescott Group Capital Management and Jim Simons’ Renaissance Technologies.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: PEAK6 Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified LINC as a viable investment and initiated a position in the stock.

Let’s check out hedge fund activity in other stocks similar to Lincoln Educational Services Corporation (NASDAQ:LINC). We will take a look at Forbes Energy Services Ltd. (NASDAQ:FES), MELA Sciences Inc (NASDAQ:MELA), Wave Systems Corp. (NASDAQ:WAVX), and Essex Rental Corp. (NASDAQ:ESSX). This group of stocks’ market caps resemble LINC’s market cap.

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was just $1 million. That figure was $2 million in LINC’s case. Essex Rental Corp. (NASDAQ:ESSX) is the most popular stock in this table. On the other hand Forbes Energy Services Ltd. (NASDAQ:FES) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Lincoln Educational Services Corporation (NASDAQ:LINC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.