At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of March 31. In this article, we will use that wealth of knowledge to determine whether or not Scholastic Corp (NASDAQ:SCHL) makes for a good investment right now.
Scholastic Corp (NASDAQ:SCHL) investors should pay attention to a decrease in enthusiasm from smart money in recent months. SCHL was in 10 hedge funds’ portfolios at the end of March. There were 13 hedge funds in our database with SCHL holdings at the end of the previous quarter. Our calculations also showed that SCHL 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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 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 look at the new hedge fund action surrounding Scholastic Corp (NASDAQ:SCHL).
Hedge fund activity in Scholastic Corp (NASDAQ:SCHL)
At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in SCHL a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Scholastic Corp (NASDAQ:SCHL) was held by Royce & Associates, which reported holding $82.6 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $3.4 million position. Other investors bullish on the company included Millennium Management, AQR Capital Management, and Two Sigma Advisors.
Seeing as Scholastic Corp (NASDAQ:SCHL) has faced a decline in interest from hedge fund managers, logic holds that there was a specific group of hedgies that elected to cut their full holdings in the third quarter. Intriguingly, Jim Simons’s Renaissance Technologies sold off the biggest stake of all the hedgies monitored by Insider Monkey, totaling close to $1.9 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dropped its stock, about $0.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Scholastic Corp (NASDAQ:SCHL) but similarly valued. These stocks are Inspire Medical Systems, Inc. (NYSE:INSP), Safety Insurance Group, Inc. (NASDAQ:SAFT), LendingClub Corp (NYSE:LC), and WAVE Life Sciences Ltd. (NASDAQ:WVE). This group of stocks’ market caps are closest to SCHL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INSP | 18 | 254212 | 3 |
| SAFT | 11 | 43699 | 0 |
| LC | 11 | 6740 | 4 |
| WVE | 24 | 552215 | 3 |
| Average | 16 | 214217 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $92 million in SCHL’s case. WAVE Life Sciences Ltd. (NASDAQ:WVE) is the most popular stock in this table. On the other hand Safety Insurance Group, Inc. (NASDAQ:SAFT) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Scholastic Corp (NASDAQ:SCHL) is even less popular than SAFT. Hedge funds dodged a bullet by taking a bearish stance towards SCHL. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately SCHL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SCHL investors were disappointed as the stock returned -16.5% during the same time frame 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 the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.
