We can judge whether 2U Inc (NASDAQ:TWOU) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is 2U Inc (NASDAQ:TWOU) a buy right now? Prominent investors are turning less bullish. The number of long hedge fund bets were cut by 3 in recent months. Our calculations also showed that TWOU 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.
Let’s take a peek at the fresh hedge fund action surrounding 2U Inc (NASDAQ:TWOU).
Hedge fund activity in 2U Inc (NASDAQ:TWOU)
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the second quarter of 2018. On the other hand, there were a total of 18 hedge funds with a bullish position in TWOU a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Polar Capital was the largest shareholder of 2U Inc (NASDAQ:TWOU), with a stake worth $35.4 million reported as of the end of September. Trailing Polar Capital was Millennium Management, which amassed a stake valued at $17.5 million. Greenvale Capital, Renaissance Technologies, and Portolan Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Because 2U Inc (NASDAQ:TWOU) has experienced declining sentiment from the smart money, it’s safe to say that there exists a select few hedgies that slashed their positions entirely in the third quarter. Intriguingly, Mark N. Diker’s Diker Management dropped the largest investment of the “upper crust” of funds tracked by Insider Monkey, valued at close to $5.7 million in stock. Brad Farber’s fund, Atika Capital, also cut its stock, about $5 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to 2U Inc (NASDAQ:TWOU). We will take a look at RLJ Lodging Trust (NYSE:RLJ), The Timken Company (NYSE:TKR), Tetra Tech, Inc. (NASDAQ:TTEK), and Eagle Materials, Inc. (NYSE:EXP). This group of stocks’ market values are closest to TWOU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RLJ | 25 | 220103 | 5 |
| TKR | 25 | 178477 | -4 |
| TTEK | 25 | 71080 | 8 |
| EXP | 25 | 520317 | -7 |
| Average | 25 | 247494 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $107 million in TWOU’s case. RLJ Lodging Trust (NYSE:RLJ) is the most popular stock in this table. On the other hand RLJ Lodging Trust (NYSE:RLJ) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks 2U Inc (NASDAQ:TWOU) is even less popular than RLJ. 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 TWOU, though not to the same extent, as the stock returned 24% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
