Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Scholastic Corp (NASDAQ:SCHL) was in 13 hedge funds’ portfolios at the end of the third quarter of 2016. SCHL investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. There were 11 hedge funds in our database with SCHL positions at the end of June. At the end of this article we will also compare SCHL to other stocks including Gannett Co., Inc. (NYSE:GCI), First Financial Bancorp (NASDAQ:FFBC), and Qualys Inc (NASDAQ:QLYS) to get a better sense of its popularity.
Follow Scholastic Corp (NASDAQ:SCHL)
Follow Scholastic Corp (NASDAQ:SCHL)
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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Keeping this in mind, we’re going to take a glance at the key action encompassing Scholastic Corp (NASDAQ:SCHL).
What have hedge funds been doing with Scholastic Corp (NASDAQ:SCHL)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the second quarter of 2016. By comparison, 16 hedge funds held shares or bullish call options in SCHL heading into this year. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Royce & Associates, led by Chuck Royce, holds the biggest position in Scholastic Corp (NASDAQ:SCHL). Royce & Associates has a $83 million position in the stock, comprising 0.5% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, led by Jim Simons, holding a $3.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions encompass Joel Greenblatt’s Gotham Asset Management, Ken Griffin’s Citadel Investment Group and Paul Tudor Jones’s Tudor Investment Corp. 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.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Millennium Management, led by Israel Englander, established the largest position in Scholastic Corp (NASDAQ:SCHL). Millennium Management had $0.6 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $0.3 million position during the quarter. The other funds with new positions in the stock are Alec Litowitz and Ross Laser’s Magnetar Capital and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now review hedge fund activity in other stocks similar to Scholastic Corp (NASDAQ:SCHL). We will take a look at Gannett Co., Inc. (NYSE:GCI), First Financial Bancorp (NASDAQ:FFBC), Qualys Inc (NASDAQ:QLYS), and OneBeacon Insurance Group, Ltd. (NYSE:OB). This group of stocks’ market values resemble SCHL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GCI | 18 | 65906 | 2 |
| FFBC | 8 | 27985 | 0 |
| QLYS | 14 | 182096 | 1 |
| OB | 10 | 18859 | -1 |
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $92 million in SCHL’s case. Gannett Co., Inc. (NYSE:GCI) is the most popular stock in this table. On the other hand First Financial Bancorp (NASDAQ:FFBC) is the least popular one with only 8 bullish hedge fund positions. Scholastic Corp (NASDAQ:SCHL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard GCI might be a better candidate to consider taking a long position in.
