Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of 2U Inc (NASDAQ:TWOU) based on that data and determine whether they were really smart about the stock.
2U Inc (NASDAQ:TWOU) shareholders have witnessed an increase in enthusiasm from smart money of late. 2U Inc (NASDAQ:TWOU) was in 24 hedge funds’ portfolios at the end of June. The all time high for this statistics is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TWOU isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to take a look at the latest hedge fund action surrounding 2U Inc (NASDAQ:TWOU).
Hedge fund activity in 2U Inc (NASDAQ:TWOU)
At Q2’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 71% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in TWOU a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, D E Shaw was the largest shareholder of 2U Inc (NASDAQ:TWOU), with a stake worth $101.9 million reported as of the end of September. Trailing D E Shaw was Sachem Head Capital, which amassed a stake valued at $52.8 million. Two Sigma Advisors, Greenvale 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 Greenvale Capital allocated the biggest weight to 2U Inc (NASDAQ:TWOU), around 3.8% of its 13F portfolio. Sachem Head Capital is also relatively very bullish on the stock, earmarking 3.76 percent of its 13F equity portfolio to TWOU.
Now, specific money managers were leading the bulls’ herd. Greenvale Capital, managed by Bruce Emery, established the most valuable position in 2U Inc (NASDAQ:TWOU). Greenvale Capital had $24.7 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $10.3 million position during the quarter. The other funds with brand new TWOU positions are Jeff Osher’s No Street Capital, Mark Coe’s Intrinsic Edge Capital, and Chet Kapoor’s Tenzing Global Investors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as 2U Inc (NASDAQ:TWOU) but similarly valued. We will take a look at Franklin Electric Co. (NASDAQ:FELE), Weingarten Realty Investors (NYSE:WRI), F.N.B. Corp (NYSE:FNB), Baozun Inc (NASDAQ:BZUN), ABM Industries, Inc. (NYSE:ABM), Applied Industrial Technologies Inc (NYSE:AIT), and Builders FirstSource, Inc. (NASDAQ:BLDR). This group of stocks’ market values are closest to TWOU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FELE | 15 | 176038 | -1 |
| WRI | 19 | 86620 | -1 |
| FNB | 24 | 68816 | 0 |
| BZUN | 15 | 70738 | 3 |
| ABM | 21 | 49636 | 3 |
| AIT | 15 | 29147 | 1 |
| BLDR | 32 | 456822 | 3 |
| Average | 20.1 | 133974 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $286 million in TWOU’s case. Builders FirstSource, Inc. (NASDAQ:BLDR) is the most popular stock in this table. On the other hand Franklin Electric Co. (NASDAQ:FELE) is the least popular one with only 15 bullish hedge fund positions. 2U Inc (NASDAQ:TWOU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TWOU is 66.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately TWOU wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TWOU were disappointed as the stock returned -7.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
