Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Scholastic Corp (NASDAQ:SCHL) investors should pay attention to an increase in hedge fund interest recently. At the end of this article we will also compare SCHL to other stocks, including Caleres Inc (NYSE:CAL), FibroGen Inc (NASDAQ:FGEN), and Halyard Health Inc (NYSE:HYH) to get a better sense of its popularity.
Follow Scholastic Corp (NASDAQ:SCHL)
Follow Scholastic Corp (NASDAQ:SCHL)
According to most investors, hedge funds are assumed to be slow, outdated financial tools of yesteryear. While there are more than 8000 funds in operation at present, Our researchers hone in on the aristocrats of this group, approximately 700 funds. These hedge fund managers manage the majority of the hedge fund industry’s total asset base, and by monitoring their best stock picks, Insider Monkey has formulated several investment strategies that have historically outrun the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Now, we’re going to review the recent action encompassing Scholastic Corp (NASDAQ:SCHL).
What have hedge funds been doing with Scholastic Corp (NASDAQ:SCHL)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 21% from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Scholastic Corp (NASDAQ:SCHL). The fund has a $76.1 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by EMS Capital, led by Edmond M. Safra, holding a $22.2 million position; the fund has 2.3% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish include Glenn Russell Dubin’s Highbridge Capital Management, Joel Greenblatt’s Gotham Asset Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the largest position in Scholastic Corp (NASDAQ:SCHL) valued at $4 million at the end of the quarter. D. E. Shaw’s D E Shaw also made a $2.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, David Costen Haley’s HBK Investments, and Matthew Tewksbury’s Stevens Capital Management.
Let’s now review hedge fund activity in other stocks similar to Scholastic Corp (NASDAQ:SCHL). These stocks are Caleres Inc (NYSE:CAL), FibroGen Inc (NASDAQ:FGEN), Halyard Health Inc (NYSE:HYH), and Hub Group Inc (NASDAQ:HUBG). This group of stocks’ market valuations are closest to SCHL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CAL | 17 | 73271 | 0 |
| FGEN | 16 | 154915 | 4 |
| HYH | 16 | 71638 | -8 |
| HUBG | 12 | 272423 | -1 |
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $137 million in SCHL’s case. Caleres Inc (NYSE:CAL) is the most popular stock in this table. On the other hand Hub Group Inc (NASDAQ:HUBG) is the least popular one with only 12 bullish hedge fund positions. With 17 long hedge fund positions, Scholastic Corp (NASDAQ:SCHL) is on par with CAL. This is a slightly positive signal, but the amount invested in the company is below the average in the group and we believe more research is necessary to decide whether SCHL is a good candidate for a long position.
