Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Grand Canyon Education Inc (NASDAQ:LOPE).
Is Grand Canyon Education Inc (NASDAQ:LOPE) a cheap stock to buy now? Prominent investors were in a bullish mood. The number of long hedge fund positions improved by 1 lately. Grand Canyon Education Inc (NASDAQ:LOPE) was in 25 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that LOPE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 79 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.
Israel Englander of Millennium Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. With all of this in mind we’re going to take a look at the new hedge fund action regarding Grand Canyon Education Inc (NASDAQ:LOPE).
Do Hedge Funds Think LOPE Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LOPE over the last 24 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Stadium Capital Management held the most valuable stake in Grand Canyon Education Inc (NASDAQ:LOPE), which was worth $49.4 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $21.2 million worth of shares. Montanaro Asset Management, No Street Capital, and Millennium Management 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 Stadium Capital Management allocated the biggest weight to Grand Canyon Education Inc (NASDAQ:LOPE), around 23.88% of its 13F portfolio. No Street Capital is also relatively very bullish on the stock, designating 2.54 percent of its 13F equity portfolio to LOPE.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. ExodusPoint Capital, managed by Michael Gelband, established the most outsized position in Grand Canyon Education Inc (NASDAQ:LOPE). ExodusPoint Capital had $1.3 million invested in the company at the end of the quarter. Mika Toikka’s AlphaCrest Capital Management also made a $1 million investment in the stock during the quarter. The other funds with brand new LOPE positions are Karim Abbadi and Edward McBride’s Centiva Capital, Greg Poole’s Echo Street Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Grand Canyon Education Inc (NASDAQ:LOPE) but similarly valued. We will take a look at National Vision Holdings, Inc. (NASDAQ:EYE), Madison Square Garden Sports Corp. (NYSE:MSGS), Box, Inc. (NYSE:BOX), EnerSys (NYSE:ENS), Axis Capital Holdings Limited (NYSE:AXS), JBG SMITH Properties (NYSE:JBGS), and Tegna Inc (NYSE:TGNA). This group of stocks’ market caps match LOPE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EYE | 19 | 356510 | -5 |
| MSGS | 37 | 954653 | -10 |
| BOX | 35 | 754875 | -8 |
| ENS | 19 | 201671 | -9 |
| AXS | 19 | 609412 | -4 |
| JBGS | 17 | 197535 | 6 |
| TGNA | 18 | 347074 | -2 |
| Average | 23.4 | 488819 | -4.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $489 million. That figure was $174 million in LOPE’s case. Madison Square Garden Sports Corp. (NYSE:MSGS) is the most popular stock in this table. On the other hand JBG SMITH Properties (NYSE:JBGS) is the least popular one with only 17 bullish hedge fund positions. Grand Canyon Education Inc (NASDAQ:LOPE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LOPE is 47.4. 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 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately LOPE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on LOPE were disappointed as the stock returned 1.8% since the end of June (through 10/22) 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 Grand Canyon Education Inc. (NASDAQ:LOPE)
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Disclosure: None. This article was originally published at Insider Monkey.
