“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Strategic Education, Inc. (NASDAQ:STRA) and see how it was affected.
Strategic Education, Inc. (NASDAQ:STRA) investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. STRA was in 12 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 15 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to analyze the new hedge fund action regarding Strategic Education, Inc. (NASDAQ:STRA).
How have hedgies been trading Strategic Education, Inc. (NASDAQ:STRA)?
Heading into the first quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in STRA a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Strategic Education, Inc. (NASDAQ:STRA), with a stake worth $111.1 million reported as of the end of September. Trailing Renaissance Technologies was ValueAct Capital, which amassed a stake valued at $45.9 million. Royce & Associates, Columbus Circle Investors, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Strategic Education, Inc. (NASDAQ:STRA) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few funds that decided to sell off their full holdings heading into Q3. Intriguingly, John Overdeck and David Siegel’s Two Sigma Advisors cut the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $6 million in stock. Edward Goodnow’s fund, Goodnow Investment Group, also cut its stock, about $3.4 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 3 funds heading into Q3.
Let’s now review hedge fund activity in other stocks similar to Strategic Education, Inc. (NASDAQ:STRA). These stocks are Simpson Manufacturing Co, Inc. (NYSE:SSD), Valmont Industries, Inc. (NYSE:VMI), CNO Financial Group Inc (NYSE:CNO), and Colfax Corporation (NYSE:CFX). All of these stocks’ market caps match STRA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SSD | 17 | 189870 | 0 |
| VMI | 18 | 203426 | 1 |
| CNO | 11 | 104672 | -3 |
| CFX | 27 | 333618 | 7 |
| Average | 18.25 | 207897 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $208 million. That figure was $221 million in STRA’s case. Colfax Corporation (NYSE:CFX) is the most popular stock in this table. On the other hand CNO Financial Group Inc (NYSE:CNO) is the least popular one with only 11 bullish hedge fund positions. Strategic Education, Inc. (NASDAQ:STRA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on STRA, though not to the same extent, as the stock returned 23.5% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
