Hedge Funds Aren’t Crazy About Bridgepoint Education Inc (BPI) Anymore

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last 12 months ending in October 30. Sixty three percent of these 30 stocks outperformed the market. Although the elite funds occasionally have their duds, such as Micron and Anadarko Petroleum, which fell 50% and 26%, respectively, during the same time period, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Bridgepoint Education Inc (NYSE:BPI).

Bridgepoint Education’s stock has plunged by nearly 34% since the beginning of 2015 and investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. BPI was in 11 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with BPI holdings at the end of the previous quarter. At the end of this article we will also compare BPI to other stocks, including LinnCo LLC (NASDAQ:LNCO), Pfenex Inc (NYSEMKT:PFNX), and Kimball Electronics Inc (NASDAQ:KE) to get a better sense of its popularity.

According to most market participants, hedge funds are perceived as unimportant, old financial vehicles of yesteryear. While there are more than 8000 funds in operation at present, Our experts choose to focus on the crème de la crème of this club, approximately 700 funds. Most estimates calculate that this group of people direct bulk of the smart money’s total asset base, and by tailing their first-class equity investments, Insider Monkey has identified various investment strategies that have historically outperformed the broader indices. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, we’re going to analyze the recent action surrounding Bridgepoint Education Inc (NYSE:BPI).

Hedge fund activity in Bridgepoint Education Inc (NYSE:BPI)

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management has the largest position in Bridgepoint Education Inc (NYSE:BPI), worth close to $14.6 million, corresponding to 2% of its total 13F portfolio. Coming in second is Nathaniel August’s Mangrove Partners, with a $13.2 million position; the fund has 3% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish encompass Jim Simons’ Renaissance Technologies, D. E. Shaw’s D E Shaw, and Peter Muller’s PDT Partners.

Due to the fact that Bridgepoint Education Inc (NYSE:BPI) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few money managers who sold off their full holdings heading into Q4. At the top of the heap, Brian C. Freckmann’s Lyon Street Capital dumped the biggest position of all the hedgies tracked by Insider Monkey, totaling close to $1.9 million in call options. Nantahala Capital Management, also sold off its call options, about $0.6 million worth.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Bridgepoint Education Inc (NYSE:BPI) but similarly valued. These stocks are LinnCo LLC (NASDAQ:LNCO), Pfenex Inc (NYSEMKT:PFNX), Kimball Electronics Inc (NASDAQ:KE), and Ocular Therapeutix Inc (NASDAQ:OCUL). This group of stocks’ market valuations are similar to BPI’s market valuation.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $39 million in BPI’s case. LinnCo LLC (NASDAQ:LNCO) is the most popular stock in this table. On the other hand Pfenex Inc (NYSEMKT:PFNX) is the least popular one with only 10 bullish hedge fund positions. Bridgepoint Education Inc (NYSE:BPI) registers a hedge fund interest level close to average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LNCO might be a better candidate to consider a long position.