Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Grand Canyon Education Inc (NASDAQ:LOPE) has experienced an increase in support from the world’s most elite money managers recently. Our calculations also showed that lope isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a glance at the recent hedge fund action encompassing Grand Canyon Education Inc (NASDAQ:LOPE).
Hedge fund activity in Grand Canyon Education Inc (NASDAQ:LOPE)
Heading into the second quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in LOPE a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the number one position in Grand Canyon Education Inc (NASDAQ:LOPE). Renaissance Technologies has a $40.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is D. E. Shaw of D E Shaw, with a $29.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish include George Baxter’s Sabrepoint Capital, John Overdeck and David Siegel’s Two Sigma Advisors and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Blue Mountain Capital, managed by Andrew Feldstein and Stephen Siderow, established the most outsized position in Grand Canyon Education Inc (NASDAQ:LOPE). Blue Mountain Capital had $2.7 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $1.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Principal Global Investors’s Columbus Circle Investors, Matthew Hulsizer’s PEAK6 Capital Management, and Minhua Zhang’s Weld 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 BlackBerry Limited (NYSE:BB), Elbit Systems Ltd. (NASDAQ:ESLT), YPF Sociedad Anonima (NYSE:YPF), and Arris International plc (NASDAQ:ARRS). This group of stocks’ market valuations match LOPE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BB | 23 | 667193 | 0 |
| ESLT | 2 | 13053 | -1 |
| YPF | 21 | 113069 | 6 |
| ARRS | 32 | 1197682 | -7 |
| Average | 19.5 | 497749 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $498 million. That figure was $151 million in LOPE’s case. Arris International plc (NASDAQ:ARRS) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 2 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 calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on LOPE as the stock returned 4.2% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
