Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the nearly unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Adtalem Global Education Inc. (NYSE:ATGE) investors should pay attention to a decrease in enthusiasm from smart money lately. Our calculations also showed that ATGE isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the latest hedge fund action regarding Adtalem Global Education Inc. (NYSE:ATGE).
What have hedge funds been doing with Adtalem Global Education Inc. (NYSE:ATGE)?
At Q2’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the first quarter of 2019. By comparison, 14 hedge funds held shares or bullish call options in ATGE a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in Adtalem Global Education Inc. (NYSE:ATGE) was held by AQR Capital Management, which reported holding $58.8 million worth of stock at the end of March. It was followed by Ariel Investments with a $42.3 million position. Other investors bullish on the company included Newtyn Management, D E Shaw, and Arrowstreet Capital.
Since Adtalem Global Education Inc. (NYSE:ATGE) has experienced a decline in interest from the smart money, we can see that there exists a select few money managers that slashed their entire stakes heading into Q3. It’s worth mentioning that Matthew Tewksbury’s Stevens Capital Management said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, comprising about $1.4 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also dumped its stock, about $0.7 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds heading into Q3.
Let’s check out hedge fund activity in other stocks similar to Adtalem Global Education Inc. (NYSE:ATGE). We will take a look at MGE Energy, Inc. (NASDAQ:MGEE), Independent Bank Corp (NASDAQ:INDB), AMN Healthcare Services Inc (NYSE:AMN), and Oi SA (NYSE:OIBR). All of these stocks’ market caps are similar to ATGE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MGEE | 13 | 53798 | 4 |
| INDB | 11 | 16780 | 5 |
| AMN | 14 | 109685 | 3 |
| OIBR | 18 | 866887 | -3 |
| Average | 14 | 261788 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $262 million. That figure was $203 million in ATGE’s case. Oi SA (NYSE:OIBR) is the most popular stock in this table. On the other hand Independent Bank Corp (NASDAQ:INDB) is the least popular one with only 11 bullish hedge fund positions. Adtalem Global Education Inc. (NYSE:ATGE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ATGE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ATGE investors were disappointed as the stock returned -15.4% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
