Is American Public Education, Inc. (APEI) a Good Stock to Buy?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in American Public Education, Inc. (NASDAQ:APEI).

American Public Education, Inc. (NASDAQ:APEI) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged and the stock was included in the portfolios of 15 hedge funds from our database at the end of September. At the end of this article we will also compare APEI to other stocks including Trinity Biotech plc (ADR) (NASDAQ:TRIB), CONN’S, Inc. (NASDAQ:CONN), and Bridgepoint Education Inc (NYSE:BPI) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, we’re going to take a peek at the recent action regarding American Public Education, Inc. (NASDAQ:APEI).

What have hedge funds been doing with American Public Education, Inc. (NASDAQ:APEI)?

Heading into the fourth quarter of 2016, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, unchanged over the quarter. The graph below displays the number of hedge funds with bullish position in APEI over the last five quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the biggest hedge funds in the world, has the number one position in American Public Education, Inc. (NASDAQ:APEI), worth close to $15.3 million. Sitting at the No. 2 spot is Gregg J. Powers’ Private Capital Management which holds a $11 million position; 1.6% of its 13F portfolio is allocated to the company. Some other peers with similar optimism encompass Cliff Asness’ AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Chuck Royce’s Royce & Associates. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Judging by the fact that American Public Education, Inc. (NASDAQ:APEI) has weathered a decline in interest from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers who sold off their positions entirely heading into Q4. Intriguingly, Robert B. Gillam’s McKinley Capital Management got rid of the biggest stake of all the hedgies watched by Insider Monkey, totaling about $3.2 million in stock. Joshua Packwood and Schuster Tanger’s fund, Radix Partners, also dumped its stock, about $0.4 million worth.

Let’s now take a look at hedge fund activity in other stocks similar to American Public Education, Inc. (NASDAQ:APEI). We will take a look at Trinity Biotech plc (ADR) (NASDAQ:TRIB), CONN’S, Inc. (NASDAQ:CONN), Bridgepoint Education Inc (NYSE:BPI), and Natural Health Trends Corp. (NASDAQ:NHTC). This group of stocks’ market valuations are closest to APEI’s market valuation.

As you can see these stocks had an average of 12 investors with bullish positions and the average amount invested in these stocks was $53 million, versus $45 million in APEI’s case. Trinity Biotech plc (ADR) (NASDAQ:TRIB) is the most popular stock in this table. On the other hand Natural Health Trends Corp. (NASDAQ:NHTC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks American Public Education, Inc. (NASDAQ:APEI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None