How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding TAL Education Group (NYSE:TAL).
TAL Education Group (NYSE:TAL) was in 25 hedge funds’ portfolios at the end of the first quarter of 2019. TAL investors should pay attention to an increase in enthusiasm from smart money recently. There were 24 hedge funds in our database with TAL positions at the end of the previous quarter. Our calculations also showed that tal isn’t among the 30 most popular stocks among hedge funds.
According to most traders, hedge funds are assumed to be worthless, old financial tools of the past. While there are more than 8000 funds with their doors open at present, Our experts look at the masters of this group, approximately 750 funds. These investment experts handle most of the smart money’s total capital, and by keeping an eye on their finest investments, Insider Monkey has revealed many investment strategies that have historically outrun the market. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by around 5 percentage points per year since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
We’re going to take a look at the key hedge fund action encompassing TAL Education Group (NYSE:TAL).
How have hedgies been trading TAL Education Group (NYSE:TAL)?
Heading into the second quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards TAL over the last 15 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in TAL Education Group (NYSE:TAL) was held by Tiger Global Management, which reported holding $340 million worth of stock at the end of March. It was followed by Tybourne Capital Management with a $244.5 million position. Other investors bullish on the company included Serenity Capital, Yiheng Capital, and AQR Capital Management.
As one would reasonably expect, some big names were breaking ground themselves. Hillhouse Capital Management, managed by Lei Zhang, assembled the biggest position in TAL Education Group (NYSE:TAL). Hillhouse Capital Management had $22.3 million invested in the company at the end of the quarter. Yi Xin’s Ariose Capital also made a $10.1 million investment in the stock during the quarter. The following funds were also among the new TAL investors: Noam Gottesman’s GLG Partners, Charles Clough’s Clough Capital Partners, and Simon Sadler’s Segantii Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as TAL Education Group (NYSE:TAL) but similarly valued. We will take a look at Shopify Inc (NYSE:SHOP), Telefonica Brasil SA (NYSE:VIV), Cheniere Energy Partners LP (NYSE:CQP), and Edison International (NYSE:EIX). This group of stocks’ market caps resemble TAL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SHOP | 25 | 1230786 | -4 |
| VIV | 9 | 69810 | -3 |
| CQP | 7 | 14019 | 3 |
| EIX | 27 | 1425279 | -1 |
| Average | 17 | 684974 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $685 million. That figure was $1056 million in TAL’s case. Edison International (NYSE:EIX) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 7 bullish hedge fund positions. TAL Education Group (NYSE:TAL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately TAL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TAL were disappointed as the stock returned -4.9% during the same 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
