Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Student Transportation Inc (NASDAQ:STB).
Is Student Transportation Inc (NASDAQ:STB) a buy? As shares continued to fall in the third quarter, investors who are in the know were opening positions. The number of bullish hedge fund bets moved up by 2 recently. STB was in 6 hedge funds’ portfolios at the end of the third quarter of 2015, up from 4 hedge funds in our database with STB positions at the end of the second quarter. However, it should be noted that the aggregate value of their holdings actually declined during the quarter, and by more than the stock’s depreciation, so there was a collective selling of shares that left the investors in our database holding just 0.80% of STB’s common shares.
The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Celyad SA (NASDAQ:CYAD), Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR), and American Public Education, Inc. (NASDAQ:APEI) to gather more data points.
To most traders, hedge funds are perceived as unimportant, old financial tools of the past. While there are greater than an 8,000 funds with their doors open at the moment, we choose to focus on the top tier of this group, around 700 funds. It is estimated that this group of investors preside over the lion’s share of the smart money’s total capital, and by monitoring their inimitable stock picks, Insider Monkey has discovered various investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Keeping this in mind, we’re going to analyze the new action encompassing Student Transportation Inc (NASDAQ:STB).
How are hedge funds trading Student Transportation Inc (NASDAQ:STB)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a leap of 50% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or had already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies holds the most valuable position in Student Transportation Inc (NASDAQ:STB). Renaissance Technologies has a $2.4 million position in the stock, comprising less than 0.1% of its 13F portfolio. Coming in second is John Overdeck and David Siegel of Two Sigma Advisors, with a $0.2 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism contain Israel Englander’s Millennium Management, Joel Greenblatt’s Gotham Asset Management, and Ken Griffin’s Citadel Investment Group.
Consequently, some big names were breaking ground themselves. Citadel Investment Group assembled the biggest position in Student Transportation Inc (NASDAQ:STB), having $0.1 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated a $0.1 million position during the quarter.
Let’s go over hedge fund activity in other stocks similar to Student Transportation Inc (NASDAQ:STB). We will take a look at Celyad SA (NASDAQ:CYAD), Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR), American Public Education, Inc. (NASDAQ:APEI), and DXP Enterprises Inc (NASDAQ:DXPE). This group of stocks’ market valuations match STB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CYAD | 4 | 11183 | -2 |
| AEGR | 16 | 203191 | 0 |
| APEI | 10 | 32328 | -1 |
| DXPE | 10 | 32131 | -2 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was just $3 million in STB’s case. Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) is the most popular stock in this table. On the other hand Celyad SA (NASDAQ:CYAD) is the least popular one with only 4 bullish hedge fund positions. Student Transportation Inc (NASDAQ:STB) is not the least popular stock in this group but hedge fund interest is still below average and they are very underweight the stock. This is a negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AEGR might be a better candidate to consider a long position in.