We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 fourth 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 4 years and analyze what the smart money thinks of Strayer Education Inc (NASDAQ:STRA) based on that data.
Is Strayer Education Inc (NASDAQ:STRA) the right investment to pursue these days? Hedge funds are getting less bullish. The number of bullish hedge fund positions decreased by 8 recently. Our calculations also showed that STRA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
According to most investors, hedge funds are seen as slow, outdated investment tools of years past. While there are over 8000 funds with their doors open today, Our researchers hone in on the top tier of this group, around 850 funds. These hedge fund managers manage the majority of the hedge fund industry’s total capital, and by keeping track of their best picks, Insider Monkey has discovered many investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Jeffrey Ubben of ValueAct Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the recent hedge fund action surrounding Strayer Education Inc (NASDAQ:STRA).
What have hedge funds been doing with Strayer Education Inc (NASDAQ:STRA)?
Heading into the first quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -38% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in STRA a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, ValueAct Capital was the largest shareholder of Strayer Education Inc (NASDAQ:STRA), with a stake worth $107 million reported as of the end of September. Trailing ValueAct Capital was Renaissance Technologies, which amassed a stake valued at $90.6 million. D E Shaw, Goodnow Investment Group, 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 Goodnow Investment Group allocated the biggest weight to Strayer Education Inc (NASDAQ:STRA), around 2.08% of its 13F portfolio. ValueAct Capital is also relatively very bullish on the stock, setting aside 1.08 percent of its 13F equity portfolio to STRA.
Due to the fact that Strayer Education Inc (NASDAQ:STRA) has faced a decline in interest from hedge fund managers, it’s easy to see that there were a few hedgies who sold off their positions entirely heading into Q4. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the largest stake of all the hedgies watched by Insider Monkey, valued at about $1.5 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund said goodbye to about $1 million worth. These moves are important to note, as total hedge fund interest was cut by 8 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Strayer Education Inc (NASDAQ:STRA). These stocks are Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), Louisiana-Pacific Corporation (NYSE:LPX), J&J Snack Foods Corp. (NASDAQ:JJSF), and Energizer Holdings, Inc. (NYSE:ENR). 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 |
|---|---|---|---|
| IOVA | 32 | 1333013 | 1 |
| LPX | 29 | 565644 | -6 |
| JJSF | 13 | 121267 | -7 |
| ENR | 22 | 193079 | 3 |
| Average | 24 | 553251 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $553 million. That figure was $274 million in STRA’s case. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is the most popular stock in this table. On the other hand J&J Snack Foods Corp. (NASDAQ:JJSF) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Strayer Education Inc (NASDAQ:STRA) is even less popular than JJSF. Hedge funds dodged a bullet by taking a bearish stance towards STRA. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately STRA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); STRA investors were disappointed as the stock returned -26% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
