While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding RISE Education Cayman Ltd (NASDAQ:REDU).
RISE Education Cayman Ltd (NASDAQ:REDU) was in 4 hedge funds’ portfolios at the end of September. REDU has experienced a decrease in hedge fund sentiment recently. There were 6 hedge funds in our database with REDU holdings at the end of the previous quarter. Our calculations also showed that REDU 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.
According to most investors, hedge funds are viewed as worthless, outdated investment tools of years past. While there are more than 8000 funds in operation today, Our researchers hone in on the masters of this group, around 750 funds. These investment experts shepherd the majority of all hedge funds’ total capital, and by following their first-class picks, Insider Monkey has formulated several investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Chase Coleman of Tiger Global
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a look at the key hedge fund action surrounding RISE Education Cayman Ltd (NASDAQ:REDU).
How are hedge funds trading RISE Education Cayman Ltd (NASDAQ:REDU)?
Heading into the fourth quarter of 2019, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in REDU a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Tiger Global Management, managed by Chase Coleman, holds the number one position in RISE Education Cayman Ltd (NASDAQ:REDU). Tiger Global Management has a $4.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, holding a $1.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions encompass David E. Shaw’s D E Shaw, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position Tiger Global Management allocated the biggest weight to RISE Education Cayman Ltd (NASDAQ:REDU), around 0.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0009 percent of its 13F equity portfolio to REDU.
Since RISE Education Cayman Ltd (NASDAQ:REDU) has faced declining sentiment from the smart money, it’s safe to say that there exists a select few hedge funds that slashed their positions entirely in the third quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace said goodbye to the largest position of the 750 funds followed by Insider Monkey, worth about $0.1 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $0.1 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to RISE Education Cayman Ltd (NASDAQ:REDU). These stocks are Teekay Offshore Partners L.P. (NYSE:TOO), Solid Biosciences Inc. (NASDAQ:SLDB), Gran Tierra Energy Inc. (NYSE:GTE), and Shoe Carnival, Inc. (NASDAQ:SCVL). All of these stocks’ market caps match REDU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TOO | 8 | 2440 | 2 |
| SLDB | 12 | 171806 | 2 |
| GTE | 13 | 159882 | 0 |
| SCVL | 15 | 101523 | 1 |
| Average | 12 | 108913 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $6 million in REDU’s case. Shoe Carnival, Inc. (NASDAQ:SCVL) is the most popular stock in this table. On the other hand Teekay Offshore Partners L.P. (NYSE:TOO) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks RISE Education Cayman Ltd (NASDAQ:REDU) is even less popular than TOO. Hedge funds dodged a bullet by taking a bearish stance towards REDU. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately REDU wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); REDU investors were disappointed as the stock returned -14.1% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
