Is Scholastic Corp (NASDAQ:SCHL) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the latest market-moving information.
Scholastic Corp (NASDAQ:SCHL) was in 11 hedge funds’ portfolios at the end of the third quarter of 2018. SCHL investors should pay attention to an increase in hedge fund interest lately. There were 9 hedge funds in our database with SCHL holdings at the end of the previous quarter. Our calculations also showed that schl isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s take a peek at the key hedge fund action regarding Scholastic Corp (NASDAQ:SCHL).
What have hedge funds been doing with Scholastic Corp (NASDAQ:SCHL)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SCHL over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Scholastic Corp (NASDAQ:SCHL) was held by Royce & Associates, which reported holding $98 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $5.5 million position. Other investors bullish on the company included Two Sigma Advisors, D E Shaw, and PEAK6 Capital Management.
Consequently, specific money managers have jumped into Scholastic Corp (NASDAQ:SCHL) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, assembled the biggest call position in Scholastic Corp (NASDAQ:SCHL). PEAK6 Capital Management had $0.9 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $0.8 million investment in the stock during the quarter. The other funds with brand new SCHL positions are Paul Tudor Jones’s Tudor Investment Corp and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Scholastic Corp (NASDAQ:SCHL) but similarly valued. These stocks are First Commonwealth Financial Corporation (NYSE:FCF), Four Corners Property Trust, Inc. (NYSE:FCPT), Heartland Express, Inc. (NASDAQ:HTLD), and Imperva Inc (NASDAQ:IMPV). All of these stocks’ market caps are closest to SCHL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FCF | 11 | 36470 | 5 |
| FCPT | 13 | 137588 | -1 |
| HTLD | 11 | 19849 | -1 |
| IMPV | 29 | 479072 | -1 |
| Average | 16 | 168245 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $168 million. That figure was $110 million in SCHL’s case. Imperva Inc (NASDAQ:IMPV) is the most popular stock in this table. On the other hand First Commonwealth Financial Corporation (NYSE:FCF) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Scholastic Corp (NASDAQ:SCHL) is even less popular than FCF. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
