We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards K12 Inc. (NYSE:LRN).
Is K12 Inc. (NYSE:LRN) a safe investment right now? Prominent investors are in an optimistic mood. The number of bullish hedge fund bets went up by 1 recently. At the end of this article we will also compare LRN to other stocks including Computer Programs & Systems, Inc. (NASDAQ:CPSI), AngioDynamics, Inc. (NASDAQ:ANGO), and Chiasma Inc (NASDAQ:CHMA) to get a better sense of its popularity.
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Keeping this in mind, let’s take a gander at the key action regarding K12 Inc. (NYSE:LRN).
What does the smart money think about K12 Inc. (NYSE:LRN)?
Heading into Q4, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, James Dondero’s Highland Capital Management has the biggest position in K12 Inc. (NYSE:LRN), worth close to $36.6 million, amounting to 1.1% of its total 13F portfolio. The second most bullish fund manager is D E Shaw, holding a $10.5 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Israel Englander’s Millennium Management, Cliff Asness’s AQR Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
As one would reasonably expect, some big names were breaking ground themselves. Hutchin Hill Capital, managed by Neil Chriss, created the most valuable position in K12 Inc. (NYSE:LRN). Hutchin Hill Capital had $0.6 million invested in the company at the end of the quarter. Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new LRN position is Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s also examine hedge fund activity in other stocks similar to K12 Inc. (NYSE:LRN). We will take a look at Computer Programs & Systems, Inc. (NASDAQ:CPSI), AngioDynamics, Inc. (NASDAQ:ANGO), Chiasma Inc (NASDAQ:CHMA), and TETRA Technologies, Inc. (NYSE:TTI). This group of stocks’ market caps are similar to LRN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CPSI | 8 | 12790 | -3 |
| ANGO | 16 | 99558 | 1 |
| CHMA | 4 | 23048 | 4 |
| TTI | 14 | 80177 | 5 |
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $59 million in LRN’s case. AngioDynamics, Inc. (NASDAQ:ANGO) is the most popular stock in this table. On the other hand Chiasma Inc (NASDAQ:CHMA) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks K12 Inc. (NYSE:LRN) 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.
