How do we determine whether Strategic Education Inc (NASDAQ:STRA) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Strategic Education Inc (NASDAQ:STRA) shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. STRA was in 19 hedge funds’ portfolios at the end of the third quarter of 2019. There were 13 hedge funds in our database with STRA positions at the end of the previous quarter. Our calculations also showed that STRA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Jeffrey Ubben of ValueAct Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the new hedge fund action surrounding Strategic Education Inc (NASDAQ:STRA).
How have hedgies been trading Strategic Education Inc (NASDAQ:STRA)?
At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 46% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in STRA a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Strategic Education Inc (NASDAQ:STRA), with a stake worth $89.1 million reported as of the end of September. Trailing Renaissance Technologies was ValueAct Capital, which amassed a stake valued at $68 million. Citadel Investment Group, D E Shaw, and GLG Partners 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 Signition LP allocated the biggest weight to Strategic Education Inc (NASDAQ:STRA), around 0.85% of its 13F portfolio. ValueAct Capital is also relatively very bullish on the stock, dishing out 0.73 percent of its 13F equity portfolio to STRA.
Consequently, key money managers have jumped into Strategic Education Inc (NASDAQ:STRA) headfirst. Gotham Asset Management, managed by Joel Greenblatt, assembled the most outsized position in Strategic Education Inc (NASDAQ:STRA). Gotham Asset Management had $1.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also made a $1.5 million investment in the stock during the quarter. The following funds were also among the new STRA investors: Benjamin A. Smith’s Laurion Capital Management, Donald Sussman’s Paloma Partners, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s go over hedge fund activity in other stocks similar to Strategic Education Inc (NASDAQ:STRA). We will take a look at Nextera Energy Partners LP (NYSE:NEP), Qualys Inc (NASDAQ:QLYS), Old National Bancorp (NASDAQ:ONB), and Envestnet Inc (NYSE:ENV). This group of stocks’ market values are similar to STRA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NEP | 15 | 66400 | 2 |
| QLYS | 17 | 113053 | 0 |
| ONB | 10 | 23347 | 0 |
| ENV | 13 | 64119 | 0 |
| Average | 13.75 | 66730 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $214 million in STRA’s case. Qualys Inc (NASDAQ:QLYS) is the most popular stock in this table. On the other hand Old National Bancorp (NASDAQ:ONB) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Strategic Education Inc (NASDAQ:STRA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately STRA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on STRA were disappointed as the stock returned 4.8% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
